Why is relatively safe debt generally less information-sensitive than equity under normal conditions?Single choice

A

Debtholders always possess exactly the same information as managers.

B

Equity is guaranteed by collateral, but debt is not.

C

Debt value moves one-for-one with every change in firm value, whereas equity has a fixed claim.

D

Debt cannot convey information because firms are legally prohibited from defaulting.

E

Debt stays near its promised payment across a wide range of firm values and moves materially only as the firm approaches default, while equity absorbs changes in value across a much wider range of outcomes.

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