What are the main characteristics of a bond? How does it differ from a stock?
What will be an ideal response?
A bond is a debt contract with a company. The investor lends an initial amount and is entitled to a certain stream of payments over the lending period. The bond holder can sell their bond at any time to another investor, who will then have the rights to the interest payments. The main risk the bond holder faces is the chance that the company (or government) will default on their bonds and fail to repay them. The key difference between bonds and stocks is that bonds are more predictable in terms of their stream of income. Stocks are considerably more volatile.
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On a typical acre of land, Iowa can produce either 300 pounds of beef or 100 pounds of soybeans in a year. On a typical acre of land, Nebraska can produce 150 pounds of beef or 200 pounds of soybeans. Which of the following is correct?
A) Nebraska should produce soybeans because its opportunity cost of soybeans is lower. B) Iowa should produce soybeans because its opportunity cost of soybeans is higher. C) Iowa should produce soybeans because its opportunity cost of soybeans is lower. D) Nebraska and Iowa should divide each acre evenly between soybean and beef production. E) Nebraska should produce soybeans because its opportunity cost of soybeans is higher.
An opportunity cost is
A) an opportunity lost. B) only the explicit costs of an action. C) only the costs a person can consciously articulate at the moment of deciding. D) none of the above.