Question

In: Economics

The difference between stocks and bonds in terms of the future payments that they are expected...

The difference between stocks and bonds in terms of the future payments that they are expected to make is

  • stocks pay fixed dividends, whereas bonds pay a variable amount of interest at regular intervals.

  • stocks pay dividends out of profits, whereas bonds pay a predetermined amount of interest at regular intervals.

  • bonds pay fixed dividends out of revenues, whereas stocks pay a variable amount of interest at regular intervals.

  • bonds pay dividends out of profits, whereas stocks pay a predetermined amount of interest at regular intervals.

Solutions

Expert Solution

Answer- Correct option is 'B'

The difference between stocks and bonds in terms of the future payments that they are expected to make is stocks pay dividends out of profits, whereas bonds pay a predetermined amount of interest at regular intervals.

The difference between stocks and bonds is that stocks are shares in the ownership of a business while bond are a form of debt that issuing entity promises to repay at some point in the future.

Stocks pay dividends out of profits, dividends represent the distribution of corporate profits to shareholders, based upon the number of shares held in the company. Shareholders expect the companies that they invest in to return profits to them, but not all companies pay dividends.

Bonds pay a predetermined amount of interest at regular intervals, thus by purchasing a bond, an investor loans money for a fixed period of time at a predetermined interest rate.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

How do stocks and bonds differ in terms of the future payments that they are expected...
How do stocks and bonds differ in terms of the future payments that they are expected to make? Which type of investment (stocks or bonds) is considered to be more risky? Given what you know, which investment (stocks or bonds) do you think commonly goes by the name “fixed income”? Answer fully and justify your answers.
Which of the following is a difference between stocks and bonds?
Which of the following is a difference between stocks and bonds? Bonds make interest payments; stocks pay dividends. Bonds represent debt; stocks represent ownership. Bonds often specify a repayment period; stocks typically do not. All of these are differences between stocks and bonds.
Discuss the differences between common stocks, preferred stocks and bonds in terms of “issuer”, “relationship with...
Discuss the differences between common stocks, preferred stocks and bonds in terms of “issuer”, “relationship with the issuer”, “voting right”, “maturity”, “return guarantee” and “priority of repayment”.
Identify or define each of the following terms. a)    The difference between futures price and expected...
Identify or define each of the following terms. a)    The difference between futures price and expected spot price in the future b)    The contract size of ethanol futures traded on Chicago Mercantile Exchange=? c)    Swap bank d)    Long position in put e)    The minimum value (lower bound) of American call, assuming no dividend=
I want to do a presentation on the difference between Stocks market and bonds market. What...
I want to do a presentation on the difference between Stocks market and bonds market. What are good academic sources that I can look for?
Discuss the difference between common stocks and bonds in investments. Discuss fundamental analysis and compare it...
Discuss the difference between common stocks and bonds in investments. Discuss fundamental analysis and compare it to technical analysis. Discuss the pros and cons of each.
Which of the following terms means the chance that future interest payments will have to be...
Which of the following terms means the chance that future interest payments will have to be reinvested at a lower interest rate? A. reinvestment rate risk B. interest rate risk C. credit quality risk D. liquidity rate risk
Stocks A and B have the following probability distributions of expected future returns:
Stocks A and B have the following probability distributions of expected future returns: Probability     A     B 0.1 (13 %) (34 %) 0.1 5 0 0.6 16 20 0.1 20 26 0.1 40 36 Calculate the expected rate of return,  , for Stock B ( = 14.80%.) Do not round intermediate calculations. Round your answer to two decimal places.   % Calculate the standard deviation of expected returns, σA, for Stock A (σB = 18.27%.) Do not round intermediate calculations. Round your...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (8%) (21%) 0.2 6 0 0.4 10 24 0.2 24 30 0.1 36 49 Calculate the expected rate of return, rB, for Stock B (rA = 12.80%.) Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the standard deviation of expected returns, σA, for Stock A (σB = 18.87%.) Do not round intermediate calculations. Round your...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability...
EXPECTED RETURNS Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.2 (14%) (35%) 0.2 4 0 0.3 12 20 0.2 18 29 0.1 30 42 Calculate the expected rate of return, rB, for Stock B (rA = 8.20%.) Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the standard deviation of expected returns, σA, for Stock A (σB = 25.07%.) Do not round intermediate calculations. Round your...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT