Short answer 25 words or less If you lend to a firm and you

(Short answer – 25 words or less) If you lend to a firm, and your debt is secured by specific assets of the firm, you cannot be hurt by actions taken by the firm’s stockholders. Is this statement true? Why or why not?

Solution

This statement is true . Its a secured debt secured by collateral its reduce the risk associated with lending.When borrower fails to make repayment the lender will sell the assets backing debt. In case of Bankruptcy equity stockholder will be paid last, secured debtholder paid first.