Which of the Following Is a Reason Why Equity Capital

question 172

Multiple Choice

Which of the following is a reason why equity capital is considered riskier than debt capital?

• A) Equity capital has a higher priority claim against assets and earnings.
• B) Equity capital requires regular periodic payments in the form of dividends.
• C) Equity capital expects dividend payments which are not tax-deductible.
• D) Equity capital remains invested in a firm indefinitely.

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Definitions:

RRSP

The Registered Retirement Savings Plan (RRSP) is a Canadian investment vehicle for individuals to save for retirement, with contributions being tax-deductible and growth being tax-deferred.

Prison Population

The total number of individuals incarcerated in a prison system at a given time.

Decreasing Rate

A situation where the rate at which a value or quantity is reduced increases over time.

Canada Savings Bond

A secure investment product offered by the Government of Canada that provides a guaranteed interest rate over a fixed period.