- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 2. Investors and Other Stakeholders
- Subject 1. Financial Claims of Lenders and Shareholders
CFA Practice Question
From the corporation's perspective, which one is riskier?
A. issung debt
B. issung equity
C. they are the same in terms of risk level.
Explanation:
For a corporation, issuing debt is riskier than issuing equity. The corporation is obligated to make the promised interest payments to the debtholders and to return the principal. Equity does not involved a contractual obligation.
However, from the investor's perspective, investing in equity is riskier than investing in debt.
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