Which best describes the difference between stocks and bonds

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04-04-2018
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Which best describes the difference between stocks and bonds

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Аноним Аноним · Answer 1 · 2018-04-05T16:55:12+02:00

Stocks (aka Equities): Stocks represent partial ownership of acorporation. If the corporation does well, its value increases, andyou share in the appreciation. However, if the corporation goesbankrupt, you can lose your entire initial investment. Bonds (aka Notes): Bonds represent a loan you make to a corporationor government. For example, you can buy a US Treasury bond for$100, and get a guaranteed interest rate for 5-years, and canexpect to get your $100 back at the end of that 5-years plusinterest. Your risk is repayment of the principal (amountinvested). Because loaning $100 to the U.S. government is much lessrisky than loaning $100 to the Brazilian government, U.S.government bonds pay a much lower rate of interest ("coupon") forborrowing your money. Stocks and Bonds .... How do they differStocks are EQUITY. They represent shares of ownership in aCorporation. A Stockholder is actually one of many owners of aPublicly Owned Corporation. If a Corporation dissolves for anyreason owners of Common Stock (the main type of stock issued)receive the value of the sold assets of the Corporation AFTEReveryone else is paid, including the IRS, Employees, Bonds,Accounts Payable, etc. Bonds are DEBT. They are sold by the Corporation in order to raisemoney for various purposes for use by the company. Bonds offer aninterest rate to the Bondholder for the period of time that theBondholder owns the bonds. Since bonds do not represent ownership, the bondholder could losetheir investment if the Corporation dissolves, but are paid BEFOREowners of stock. When you buy either bonds or stock, you pay money now with thepossibility of getting more money later. But a bond represents adebt--the company that issued the bond owes you money to be paidwhen the bond is redeemed. A stock represents ownership. As astockholder, you become a part owner of the company. Stocks,compared to bonds, have which of the following characteristics? (Apex)-----. A.. No guarantees.