Which of the following are differences between a bond and a common stock? (Select all that apply.) A. A corporation has to pay all bondholders before paying stockholders. B. A corporation has to pay all stockholders before paying bondholders. C. A bond is a debt instrument that entitles the owner to receive periodic amounts of money until its maturity date, whereas a common stock represents a share of ownership of the institution that has issued the stock. D. A bond is a claim on the earnings and assets of a corporation, whereas a common stock promises to make periodic payments for a specified period of time.

Question

Business

Sammy Berg

30 June, 16:11

Which of the following are differences between a bond and a common stock? (Select all that apply.) A. A corporation has to pay all bondholders before paying stockholders. B. A corporation has to pay all stockholders before paying bondholders. C. A bond is a debt instrument that entitles the owner to receive periodic amounts of money until its maturity date, whereas a common stock represents a share of ownership of the institution that has issued the stock. D. A bond is a claim on the earnings and assets of a corporation, whereas a common stock promises to make periodic payments for a specified period of time.

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Terrell Foster · Answer 1

A. A corporation has to pay all bondholders before paying stockholders.

C. A bond is a debt instrument that entitles the owner to receive periodic amounts of money until its maturity date, whereas a common stock represents a share of ownership of the institution that has issued the stock.

Explanation:

(A) The distribution of dividends has solvency requirement. So it cannot pay dividends if will default teh payment of the business debts.

(C) The bond will have predeterminate periodic payment and a maturity payment at the end of his life.

While the stock is the title of ownership of the company and it do not have any future cashflow associate with it. The company can decide to do not pay dividends. Also it won't warrant the return of the cost of the stock.