
To analyze: The reason of stocks being riskier than bonds.

Explanation of Solution
Stocks and bonds are certificates issued to raise capital to establish a new business or to extend an existing company. Those who purchase stocks and bonds are called investors.
Stocks are more expensive than bonds, and if a company listed on the stock exchange needs to pay off its debt holders, the lenders would be paid off after the bondholders.
In addition, the issuer of the bond is guaranteed the par value at maturity and the repayment of the coupon (if any). Return to maturity can vary based on prevailing market interest rates, but yields do not fluctuate as much as stock prices. The shareholder can lose money if the stock is
Chapter 6 Solutions
Economics Today and Tomorrow, Student Edition
Additional Business Textbook Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
Financial Accounting: Tools for Business Decision Making, 8th Edition
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
MARKETING:REAL PEOPLE,REAL CHOICES
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Intermediate Accounting (2nd Edition)
- Consider the market for electricity. Suppose that a power plant dumps byproducts into a nearby river, creating a negative externality for those living downstream from the plant. Producing additional electricity imposes a constant per-unit external cost of $490. The following graph shows the demand (private value) curve and the supply (private cost) curve for electricity. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $490 per unit. PRICE (Dollars per unit of electricity) 1400 1260 1120 980 840 700 560 420 280 140 ° D 1 2 3 D Supply (Private Cost) Demand (Private Value) 5 6 7 QUANTITY (Units of electricity) Social Cost The market equilibrium quantity is units of electricity, but the socially optimal quantity of electricity production is units. To create an incentive for the firm to produce the socially optimal quantity of electricity, the government could impose a unit of electricity. perarrow_forwardHow do mining of raw materials for a tech industry affects the human rights in the worldarrow_forwardAssume the Federal Interstate Commission began the fiscal year with the following account balances: FEDERAL INTERSTATE COMMISSION Trial BalanceOctober 1, 2020 Debits Credits Fund Balance with Treasury$810,000 Supplies 107,000 Equipment 1, 370,000 Accumulated Depreciation $484,000 Accounts Payable 130,000 Wages Payable 85,000Cumulative Results of Operations 1,588,000 $2,287,000 $2,287,000 Congress passed a spending bill providing $17,200, 000 to fund the agency's operations for the year. During the first quarter the commission processed the following items for payment (all items were paid by Treasury in the first quarter). Accounts payable$130,000 Wages payable 85,000 Salaries and benefits 507,000 Supplies 524,000 Contracted services 2,200,000 Grants 1,020,000 Equipment 620,000 Total$5,086,000 Unpaid wages at the end of the quarter totaled $37,000. In addition to the items paid in item 2, the commission received supplies of $24,000 and contracted services of $82,000 that are to be…arrow_forward
- not use aiarrow_forwardConsider the following statements: a. Fewer people are employed in Freedonia now than at any time in the past 75 years. b. The unemployment rate in Freedonia is lower now than it has been in 75 years.Can both of these statements be true at the same time? A. Yes, these statements can be correct if more people are classified as "discouraged workers."B. No, these statements cannot be true since unemployment must increase as employment decreases.C. Yes, if the number of unemployed decreases more than the number of employed.D. Yes, both of these statements can be correct if labor productivity increases.arrow_forwardAsap please and quality answerarrow_forward
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education





