Macroeconomics
Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
Question
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Chapter 18, Problem 1QQ
To determine

The stockholder and the bondholder.

Expert Solution & Answer
Check Mark

Answer to Problem 1QQ

Option ‘d’ is the correct answer.

Explanation of Solution

Option (d):

In the given scenario, D is the stock holder and Jenny is the bondholder. Both Dan and Jenny are creditors to Forest. However, the amount borrowed from Jenny owes a repayment with interest at some future date and is similar to investing in a bond. The amount that is given by Dan makes him eligible for the future payments for which he promised by Forest. This is similar to investing in a stock. Thus, option (d) is correct.

Option (a):

In the given example, Jenny is not the stockholder and Forest is not the bondholder. Jenny is the actual bondholder while Forest is the debtor. Thus, option (a) is incorrect.

Option (b):

In the given example, Jenny is not the stockholder and Dan is not the bondholder. Jenny is the actual bondholder while Dan is the stockholder. Thus, option (b) is incorrect.

Option (c):

In the given example, Dan is the stockholder. However, Forest is not the bondholder. Forest is the debtor. Thus, option (c) is incorrect.

Economics Concept Introduction

Bond: Bond refers to the securities, which are traded in public to raise the capital when needed. It is an investment with a fixed income, where an investor gives money to an entity or individual for a specified period of time at a fixed rate.

Stock: Stock refers to the share of the company which gives profit or loss to the person who holds it.

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