Question

Which best describes the difference between stocks and bonds?

A) Stocks allow investors to share in profits; bonds make investors responsible for company debts.

B) Stocks allow investors to own a portion of the company; bonds are loans to the company.

C) Stocks pay interest to investors throughout the year; bonds only pay interest at fixed times during the year.

D) Stocks are a more reliable investment; bonds tend to be more volatile.

Answer 1

Among the choices the one that best describes the difference between stocks and bonds is B, stocks allow investors to own a portion of the company; bonds are loans to the company. Stocks, or shares of stock, speak to a proprietorship enthusiasm for an organization. Bonds are a type of long haul obligation in which the issuing organization guarantees to pay the primary sum at a particular date. Stocks pay profits to the proprietors, however just if the enterprise announces a profit.

Answer 2

Option B is correct.

Stocks allow investors to own a portion of the company; bonds are loans to the company.

Further Explanation:

Stock: The stock represents the individual ownership interest in the company.

Bond: The bond is long term debt which the company promises to pay along with interest to the bondholder.  

A)

Stocks allow investors to share in profits; bonds make investors responsible for company debts: This option is incorrect.

The stock allows the investor to share the company’s profit but bond represent the debt of the company that it has taken.

B)

Stocks allow investors to own a portion of the company; bonds are loans to the company: This option is correct.

The stock represents the individual ownership interest in the company and bond represents the loan or debt, it has taken.

C)

Stocks pay interest to investors throughout the year; bonds only pay interest at fixed times during the year: This option is incorrect.

The stock pays dividend to the investor while the bond pays interest to the bondholder.

D)

Stocks are a more reliable investment; bonds tend to be more volatile: This option is incorrect.

The stock prices fluctuate more readily and are more volatile than the bond.

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Answer details:

Grade: High School

Subject: Business

Chapter: Stock and Bonds

Keywords: Stocks, Bond, to share in profits, make investors responsible for company debts, own a portion of the company, loans to the company, pay interest to investors throughout the year, only pay interest at fixed times, more reliable investment.