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UPSC Prelims 2025 Paper-I 📅 25 May, 2025

Consider the following statements:
Statement I: As regards returns from an investment in a company, generally, bondholders are considered to be relatively at lower risk than stockholders.
Statement II: Bondholders are lenders to a company whereas stockholders are its owners.
Statement III: For repayment purpose, bondholders are prioritized over stockholders by a company.

Which one of the following is correct in respect of the above statements?

A
Both Statement II and Statement III are correct and both of them explain Statement I
B
Both Statement II and Statement III are correct but only one of them explains Statement I
C
Only one of the Statements II and III is correct and that explains Statement I
D
Neither Statement II nor Statement III is correct
Result Summary
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UPSC Prelims
2025 • 25 May, 2025 • Paper-I
Consider the following statements:
Statement I: As regards returns from an investment in a company, generally, bondholders are considered to be relatively at lower risk than stockholders.
Statement II: Bondholders are lenders to a company whereas stockholders are its owners.
Statement III: For repayment purpose, bondholders are prioritized over stockholders by a company.

Which one of the following is correct in respect of the above statements?
Correct Answer
Both Statement II and Statement III are correct and both of them explain Statement I
Bondholders face lower risk (Statement I) precisely because they are lenders with fixed return agreements (Statement II) and have a senior legal claim on assets......
Ref/Book : UPSC Prelims 2025
Ref. Subject Economy
Chapter -
Ref. Topic Financial Markets
Pg. No -
💡 Analysis & Explanation
Introduction ▼
Bondholders face lower risk (Statement I) precisely because they are lenders with fixed return agreements (Statement II) and have a senior legal claim on assets during liquidation compared to equity stockholders (Statement III). Both II and III explain I.
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