Compare stocks and bonds with respect to risk and return.

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Expert Solution

Solution :-

As we know stocks having high risk while bonds having low risk because the price of the stock fluctuates speedily while the price of the bonds fluctuates rarely and we all know taking the high risks means earning the huge returns.

The stock holders are taking risk in the business they are getting share in profit as well as loss in the company while the bonds holders getting interest at fixed rate they are not sharing any loss .

Similarly bonds holders gets only interest in case of huge profit all the remaining profit distributes only to stock holders.

Bond holders are just a lenders while the stock holders are the owners of the company.

Also they are getting the return at last while the bond holders getting the interest before the shareholders equity as well as preference also.

The stocks are tradeble as well as transfer easily so they fluctuate very speedy due to high demand of sell and buy.

Due to all this we conclude that the stocks has return because they take high risks while the bonds has low return as compared to stock because they are getting fixed interest because they can not take any risk.

Rahul Sunny answered 7 months ago

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