Series 79 practice questionhardCapital Structure Analysis
Which financing instrument generally sits highest in the capital structure and therefore has first claim on collateral in a default?
- ACommon equity
- BSubordinated notes
- CSenior secured debt✓ Correct answer
- DPreferred equity
Explanation
Why C — Senior secured debt
Senior secured debt Senior secured lenders are contractually ahead of unsecured and subordinated creditors and hold liens on pledged assets. Because they have greater recovery protection, senior secured loans typically price at lower coupons than junior instruments.
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