The difference between the Stock and the Bond.
Answer to Problem 1QCMC
Option 'd' is correct.
Explanation of Solution
Both the Stocks and the Bonds are the financial market instruments used by the people in the economy. Amongst them, the share provides the ownership right to those who holds them whereas the Bond is an income investment which is fixed and thus it acts as a certificate of indebtedness. There are many matches between the Stocks and the Bonds. Both of them are financial instruments, used to raise capital to the firm, traded on exchange and both entail risks.
Option (d):
The stock makes the holder of the stock to be a shareholder of the firm which issues the stock. This means the stock holder holds the ownership share of the firm and thus, the stock provides the share of the firm's profit to the stock holder. The Bond on the other hand is a certificate of indebtedness which guarantees the repayment of the loan amount when the bond matures and it provides interest to the loan issuer by the taking firms. Here, individual J offered one-third of the profit of the firm which means Jerry is a stock holder whereas the individual George who receives interest for the amount provided is a bond holder. Thus, option 'd' is correct.
Option (a):
The stock makes the holder of the stock to be a shareholder of the firm and it provides the share of the firm's profit to its holder whereas the Bond is a certificate of indebtedness which guarantees the repayment of the loan amount after the maturity period of the bond. Here, Elaine is the issuer of Bond and stock to George and Jerry because he takes the money from both of them to create capital and start the business. Here, George receives interest and jerry receives share of profit. So George is the Bond holder and Jerry is the stockholder. Since, Elaine is not amongst the two groups, option 'a' is incorrect.
Option (b):
The stock makes the holder of the stock to be a shareholder of the firm and it provides the share of the firm's profit to its holder whereas the Bond is a certificate of indebtedness which guarantees the repayment of the loan amount after the maturity period of the bond.
Here, George receives interest which is received on the Bonds and Jerry receives share of profit which is by the stock. Thus, they are Bond holders and stock holders respectively. Since the option explains them inversely, option 'b' is incorrect.
Option (c):
The stock provides share of profit to the holder of the stock and thus, Jerry who receives the profit share of the firm is a stockholder. But Elaine is the individual who issues the Bonds and stocks in order to raise the capital need for the firm and thus he is neither a bondholder nor a stockholder. Since option explains Elaine as a Bondholder, option 'c' is incorrect.
Concept introduction:
Stock: A stock means a partial ownership of the firm. The stocks are the shares are sold to the people in order to raise the capital for the firm. Thus, those who owns stocks owns the share of the ownership of the firm.
Bond: It is the certificate of indebtedness of the bond issuer to the holder. So, it is a fixed income investment in which an investor loans capital to an entity for a period of time at variable interest rates.
Want to see more full solutions like this?
Chapter 8 Solutions
Brief Principles of Macroeconomics (MindTap Course List)
- d-farrow_forwardG please!arrow_forward4. Consider two polluting firms, with the marginal abatement costs of polluters 1 and 2, respectively, equal to MAC₁ = 20-E1 MAC2 = 12-E2 a. What is the unregulated level of pollution for each firm? b. Assume policymakers have decided to cut the level of pollution in half. The way they intend to accomplish this goal is to require both firms to cut their pollution in half. What are the total costs of abatement from the policy? And how are these costs distributed between the firms? c. Is this uniform quota on emissions across firms the most cost-effective manner in which to reduce emissions by 50%?arrow_forward
- Don't used hand raiting and don't used Ai solutionarrow_forwardThanks in advance!arrow_forwardI need help figuring this out. I'm pretty sure this is correct?If Zambia is open to international trade in oranges without any restrictions, it will import 180 tons of oranges.I can't figure these two out: 1) Suppose the Zambian government wants to reduce imports to exactly 60 tons of oranges to help domestic producers. A tariff of ???? per ton will achieve this. 2) A tariff set at this level would raise ????in revenue for the Zambian government.arrow_forward
- 16:10 ← BEC 3701 - Assignments-... KWAME NKRUMAH UNIVERSITY TEACHING FOR EXCELLENCE SCHOOL OF BUSINESS STUDIES DEPARTMENT OF ECONOMICS AND FINANCE ADVANCED MICRO-ECONOMICS (BEC 3701) Assignments INSTRUCTIONS: Check instructions below: LTE 1) Let u(q1,q2) = ln q₁ + q2 be the (direct) utility function, where q₁ and q2the two goods. Denote P₁ and P2 as the prices of those two goods and let M be per period money income. Derive each of the following: a) the ordinary or Marshallian demand functions q₁ = d₂ (P₁, P₂, M) for i = 1,2 [3 Marks] b) the compensated or Hicksian demand functions q₁ = h₂ (P₁, P2, M) for i = 1,2 [3 Marks] c) the Indirect Utility Function uº = v(P₁, P2, M) [3 Marks] d) the Expenditure Function E(P1, P2, U°) [3 Marks] e) Draw a diagram of the solution. There should be two graphs, one above the other; the first containing the indifference curves and budget constraint that characterize the solution to the consumer's choice problem; the second characterizing the demand…arrow_forwardHow would you answer the question in the News Wire “Future Living Standards”? Why?arrow_forwardal Problems (v) T (ix) F 1. Out of total number of 2807 women, who were interviewed for employment in a textile factory, 912 were from textile areas and the rest from non-textile areas. Amongst the married women, who belonged to textile areas, 347 were having some work experience and 173 did not have work experience, while for non-textile areas the corresponding figures were 199 and 670 respectively. The total number of women having no experience was 1841 of whom 311 resided in textile areas. Of the total number of women, 1418 were unmarried and of these the number of women having experience in the textile and non-textile areas was 254 and 166 respectively. Tabulate the above information. [CA. (Foundation), May 2000 Exactly (14) of the total employees of a sugar mill were these were married and one-halfarrow_forward
- How did Jennifer Lopez use free enterprise to become successful ?arrow_forwardAn actuary analyzes a company’s annual personal auto claims, M and annual commercialauto claims, N . The analysis reveals that V ar(M ) = 1600, V ar(N ) = 900, and thecorrelation between M and N is ρ = 0.64. Compute V ar(M + N ).arrow_forwardDon't used hand raitingarrow_forward
Principles of Macroeconomics (MindTap Course List)EconomicsISBN:9781285165912Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou...EconomicsISBN:9781285165875Author:N. Gregory MankiwPublisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics Today and Tomorrow, Student EditionEconomicsISBN:9780078747663Author:McGraw-HillPublisher:Glencoe/McGraw-Hill School Pub Co
Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning