Question

Compare characteristics of corporate bonds and stocks. List three to five characteristics.

Please do not copy and paste, thank you.

Answer 1

(1) Ownership : The difference between stocks and bonds is that stocks are shares in the ownership of a business, while bonds are a form of debt that the issuing entity promises to repay at some point in the future

(2) Priority of repayment : In the event of the liquidation of a business, the holders of its stock have the last claim on any residual cash, whereas the holders of its bonds have a considerably higher priority, depending on the terms of the bonds. This means that stocks are a riskier investment than bonds.

(3)Periodic payments: A company has the option to reward its shareholders with dividends, whereas it is usually obligated to make periodic interest payments to its bond holders for very specific amounts.

(4) Voting rights: The holders of stock can vote on certain company issues, such as the election of directors. Bond holders have no voting rights.