A type of bond that is unsecured and gives bondholders a claim secondary to that of other designated bondholders with respect to both income and assets is called a (n)

Question

Catherine

Business

17 May, 08:19

A type of bond that is unsecured and gives bondholders a claim secondary to that of other designated bondholders with respect to both income and assets is called a (n)

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Frances Frazier · Answer 1

The correct answer is: subordinated debenture.

Explanation:

If a company goes into bankruptcy and faces liquidation there is a hierarchy among the debt owed to the company's creditors. Holders of higher rank debt receive payment first. Government tax authorities, the liquidator and senior debt holders are at the top of the hierarchy. Subordinated debenture holders are lower in the hierarchy but before common stockholders.