Compare the risks and returns of a 10-year bond, a preferred stock and a common stock...

Compare the risks and returns of a 10-year bond, a preferred stock and a common stock issued by a listed company. Explain the reason(s).

Expert Solution

The return associated with 10 year Bond would be lowest among all of them because these bonds are highly secured and long term bonds which will have fixed rate of payment in form of interest.

preferred equity will be having a rate of return which is better than these bonds but lower than the common equity.

equity shareholders will be having the highest probability of making the highest rate of return because they are owners of the company and gaining through capital appreciation.

Risk associated with equity is highest because they are exposed to ownership risks and value can also be going down and they have no claim on the Assets of the company.

preferred equity will also be having some kind of assurance because they will be having a fixed rate of dividend payment.they will also be having a prior claim than equity shareholders .

b

Bondholder should be more secured because there are less risky and they are always protected and secured so their repayments are almost certain.

jeff jeffy answered 1 year ago

Compare the risks and returns of a 10-year bond, a preferred stock and a common stock...

Compare the risks and returns of a 10-year bond, a preferred stock and a common stock issued by a listed company. Explain the reason(s).

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Compare the risks and returns of a 10-year bond, a preferred stock and a common stock...

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