Creditors and Shareholders May Have an Incentive Incompatibility Because

Multiple Choice

Creditors and shareholders may have an incentive incompatibility because:

A) shareholders can declare bankruptcy and hence have limited liability.
B) creditors must bear less risk than shareholders.
C) creditors can call debt if better opportunities arise.
D) shareholders choose projects with less risk than creditors would like.
E) none of the above; creditors and shareholders are both interested in maximizing the profits of the enterprise.