Question

If a bond is junior or subordinated, it a. Has a higher priority status than specified...

If a bond is junior or subordinated, it

a. Has a higher priority status than specified creditors.

b. Has been issued because the company is in default.

c. Must give preference to senior creditors in the event of default.

d. Is secondary to equity.

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Answer #1

Junior bonds or subordinated bonds will not be having the priority in payments of debts in case of default by the company because the senior debt will be discharged first by the Assets of the company and they will be having the first preference, so these bonds have been named accordingly in order to their payout order.

all the other statements are false because it does not have a higher priority status than the specified creditors and it has not been issued because the company is in default.

Correct answer will be option (C) it must give preference to senior creditor in event of default.

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