Question

Which of the following is a difference between common stock and bonds? Select one: a. Dividend...

Which of the following is a difference between common stock and bonds?
Select one:
a. Dividend paid to stockholders is tax-deductible but interest paid to bondholders are not.
b. Bondholders have a senior claim on assets and income relative to stockholders.
c. Stocks have a stated maturity but bonds do not.
d. Bondholders have a voice in management; common stockholders do not.
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Answer #1

Answer : Correct Option is (b.)Bondholders have a senior claim on assets and income relative to stockholders.

Reason :

Option a is incorrect as interest paid to bond holder is tax deductible. Stocks do not have stated maurity infact bonds have stated maturity therefore option c is also incorrect . Common Stockholders represent the company and have voting rights and voice in the management therefore option d is also incorrect. Therefore the main difference between common stock and bondholder is that  Bondholders have a senior claim on assets and income as compared to stockholders.Therefore correct option is Option (b.)

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