SIE Understanding Products and Their Risks Practice Question 36

Correct Answer: B

Explanation:

B: Choice B is correct because bondholders expect to see the market value of bonds rise when interest rates decline. Choice A is incorrect because preferred shareholders are typically focused on dividends and preference in the event of liquidation. Choice C is incorrect because an attraction of common stock is increase in the market value as bond holders and preferred stockholders have limited claims on the value of the company. As the company grows, common shareholders have claims on the increase of market capitalization value. Choice D is not true because creditors depend upon the financial strength of the company to enable it to make payments when due.