Question

Compare and contrast the risk and return for debt and equity securities from the perspective of both lenders/investors and issuers.

Answer 1

Both the Debt and equity securities can provide good returns. But when we look from the perspective of lenders and investors, they contain some differences. Debt instruments are providing fixed interest payments to the investor, while Equity instruments such as stock give returns with a claim on the assets as well as the earning of the enterprise. Debt instruments are having   lower risk than the equity instruments. it offer a lower consistent return as compared to Equity investments. Normally Debt instruments are having less volatility than Equity investments. As compared to Equity investments, the bond and mortgage market are experiences small price changes.

we can’t predict the changes in the equity investments. equity markets are always having volatility. There may often have changes in the value of equity. Equity investments contain higher risk of loss in return or sometimes provide better returns also to the investor. The companies often prefer to borrow from various investors Instead of taking a commercial bank loan. Equity instruments are giving an ownership position in the company to the holders. Owner of the Equity instrument is also the owner of the organization. ownership level depends on the number of shares owned by the equity holder.  

The investor's choice and preferences is based on theier investment purposes. Every investments contain some risk. But normally Debt instruments are having   less risk than the equity instruments. If our goals are growth and profit, then our investing options will be equity investments.

kindly support by rating the answer, if you are satisfied with the solution