Consider the following statements:
Statement I: As regards returns from an investment in a company, generally, bondholders are considered to be relatively at lower risk than stockholders.
Statement II: Bondholders are lenders to a company whereas stockholders are its owners.
Statement III: For repayment purpose, bondholders are prioritized over stockholders by a company.
Which one of the following is correct in respect of the above statements?

Correct Option: Both Statement II and Statement III are correct and both of them explain Statement I

Statement I states that bondholders are at lower risk than stockholders. Statement II explains this by stating that bondholders are lenders (creditors) who receive fixed returns regardless of company profits, whereas stockholders are owners bearing residual risk. Statement III further explains Statement I by noting that in liquidation or repayment, bondholders have a legal priority over stockholders. Both Statement II and Statement III provide the foundational financial and legal reasons that directly explain why bondholders face lower risk than stockholders as asserted in Statement I.