Question

Consider the effect of business cycles on bondholders versus stockholders. We expect that business cycles will affect:

Answer 1

stockholders more since they are residual claimants

Step-by-step explanation:

We expect that business cycles will affect stockholders more since they are residual claimants. Meaning that they receive their claims only after the more important precedent agents' make their claims. This is because a stockholder legally owns one or more parts (shares) of a specific company and therefore also inherits the risks of the company and are the last to be able to recover their money if the company crashes.