Correct answer with Explanation (General Finance) What is the main difference between stocks andbonds? a) Stocks represent ownership, while bondsrepresent debt b) Stocks are always riskier thanbonds c) Bonds always provide higher returns thanstocks d) Stocks are issued by governments, whilebonds are issued by companies

Explanation of Stocks:Stocks represent ownership in a company. When you purchase a stock, you become…

Answered: What is the main difference between…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 6QTD

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Choose the correct statement about different types of financial markets: a. Capital market is the market for short-term government and corporate debt securities b. None of these c. Money market is market for long-term financial instruments d. Stock market is the market where participants can issue and trade stocks
Common stocks typically have which of the following that bonds do NOT have? 1. I. Voting rights 2. I1. Fixed cash flows 3. Ill. Set maturity date 4. IV. Tax deductibility of cash flows to investors
Which of the following are money market instruments? Check all that apply. Common stocks Commercial paper Corporate bonds Treasury bills Preferred stocks A financial instrument whose value is derived from the value of an underlying asset is called a (Speculation, hedge, derivative)
Role of the component of the financial system is very important to ensure smooth flow of funds and financial system stability. Financial markets are mechanisms where those requiring finance (deficit units) can get connected with those able to supply it (surplus units) a) Critically evaluate the role of the components of the financial system. b) What are some of the characteristics associated with dividends paid on common stock? c) In what major ways do stocks differ from bonds?
Which of the following is a difference between stocks and bonds? Select one: a. cash flows to bondholders are not known and not promised, cash flows to stockholders are known and promised b. companies issue stocks to grow the company and issue debt to pay bills c. required returns on debt are typically lower than required returns on equity d. dividends are legal obligations of the firm; coupons are not. Clear my choice
The cash flows associated with common stock are more difficult to estimate than those related to bonds because stock has a residual claim against the company versus a contractual obligation for a bond. Group of answer choices True False
In detail
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 nickname “fixed income”?
Both stock and bond returns are based on the cash flows generated by the issuing firm. How do shareholders and bondholders differ in their claimof the firm’s cash flows? How doessuch claim difference cause the risk difference between stocks and bonds?
Why might a firm prefer to finance its investments with bonds rather than stocks? Alternatively, why might a firm prefer stocks to bonds?
Capital markets are markets for short-term debt securities. True False
If bonds payable are not callable, the issuing corporation a.can exchange them for common stock b.can repurchase them in the open market c.is more likely to repurchase them if the interest rates increase d.must get special permission from the SEC to repurchase them

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What is the main difference between stocks and bonds? a) Stocks represent ownership, while bonds represent debt b) Stocks are always riskier than bonds c) Bonds always provide higher returns than stocks d) Stocks are issued by governments, while bonds are issued by companies