🏦LTB
← Series 7: Investment Information & Recommendations
Series 7 practice questioneasyDebt Securities — Corporate Bonds — Subordinated Debenture

In the event of a corporate liquidation, subordinated debentures are paid:

  1. ABefore all other creditors
  2. BOnly after common stockholders are paid
  3. CAfter preferred stockholders but before common stockholders
  4. DAfter secured bonds and senior debentures but before preferred stockholders✓ Correct answer
Explanation

Why D — After secured bonds and senior debentures but before preferred stockholders

Subordinated debentures have a lower claim priority than secured bonds and senior unsecured debentures, but they rank higher than preferred and common stockholders in a liquidation. The complete priority order is: secured creditors, senior unsecured creditors, subordinated debentures, preferred stockholders, and common stockholders. The lower priority means subordinated debentures typically offer higher yields to compensate for the additional risk.

Turn it into reps

Reading one answer is not the same as being ready

Lucky the Banker is a free practice app with 755+ Series 7 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.

Practice Series 7 freeSeries 7 exam guide
Related Investment Information & Recommendations questions