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4 years ago

Why is a high-quality bond typically considered a lower-risk investment than a stock?

2 answers:

8 0

The reason why a high-quality bond typically considered a lower-risk investment than a stock is: B.A bond typically pays a fixed, predictable amount of interest each year.

Meanwhile, the value of a stock is very volatile depended on the condition of the market. The constant changing of prospect make investing in stocks became a very risky move because you could lose a huge amount of capital in a very short period of time.

katrin [286]4 years ago

5 0

The correct option is (B).

A bond typically pays a fixed, predictable amount of interest each year.

Further Explanation:

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

Bond: The bond is a long-term debt which the company promises to pay with interest to their bondholders.

Justification for the correct and incorrect answer:

Stocks are stable and do not change often:This option is incorrect.

Stocks are unstable, volatile in nature, and their value changes often. And their dividends are also unpredictable.

A bond typically pays a fixed, predictable amount of interest each year:This option is correct.

A bond pays a fixed amount of interest each year, and the amount is predictable; also, the bondholders get the benefit of interest to be paid first if the company is in loss also.

Bonds are issued by many different entities:This option is incorrect.

Bonds can be issued by many different entities or companies. But this option does not make any sense regarding the lower-risk investment of the bond than the stock.

Well-established company stocks pay dividends to their investors:This option is incorrect.

Well-established company stocks do not mean that they will pay dividends to their investors. The company might retain profits and can invest the amount in the future.

Learn More:

1. Stock and bonds

brainly.com/question/1330190

2. Stock price

brainly.com/question/11192535

3. Stock portfolio

brainly.com/question/5728646

Answer Details:

Grade: High school

Chapter: Stocks and bonds

Subject: Business studies

Keywords: Why is a high-quality bond typically considered a lower-risk investment than a stock, stocks are stable and do not change often, a bond typically pays a fixed, predictable amount of interest each year, bonds are issued by many different entities, well-established company stocks pay dividends to their investors.

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