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3 years ago

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

2 answers:

7 0

The answer is A.
There is risk involved in owning a stock, and many unknown variables. The value of the stock could plummet, putting your principal investment at risk. There is no guarantee of return on investment, and even well-established companies have had to cut dividends during difficult times.

In the case of bonds, you are guaranteed by the bond issuer that your principal and the agreed-upon interest will be paid at a defined time. Excluding the event of bankruptcy (and still likely in this case), you are virtually guaranteed that the entity will pay you according to the agreed-upon terms. For this reason, bonds are considered a much lower risk investment.

Why then, do many people choose to invest at least part of their portfolio in stocks? Stocks generally have a much high expected return, and many people consider this increased return worth the increased risk that with it.

andriy [413]3 years ago

7 0

The correct option is (A).

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

Further Explanation:

Justification for the correct and incorrect answer:

A.)

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.

B.)

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.

C.)

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.

D.)

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

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2. Stock price

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3. Stock portfolio

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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 stock, a bond typically pays a fixed, predictable amount of interest each year, stocks are stable and do not change often, bonds are issued by many different entities, well-established company stocks pay dividends to their investors.

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Indicate whether each of the following is a finalâ€‹ good, an intermediateâ€‹ good, or neither.

butalik [34]

Answer:

1. Coffee beans purchased by a coffee shop -- intermediate good.
2. One share of Google stock -- neither.
3. A new pick-up truck purchased by a consumer -- final good.
4. A new home purchased by a family -- final good.

Explanation:

An intermediate good is a semi-finished good that is used as the inputs of the production and makes them sell and buy the goods. While the final good is one that is finished in processing and is ready to be consumed and those goods that are present in a stocks firm are not used and neither is been developed are google stocks.

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3 years ago

a corporation reported cash of $14,000 and total assets of $178,300 on its balance sheet. its common-size percent for cash equal

34kurt

B. 7.85% is the is its common-size percent for cash (14000÷178300)×100

Line items are shown as a percentage of a single chosen or common figure in a financial statement of common size. A balance sheet will contain different line items depending on the type of firm and the industry. Since all businesses in a given industry deal with the same kinds of transactions, the line items utilised for their balance sheets will typically be comparable.

It is simpler to study a company over time and evaluate it against its competitors when financial statements are created in a common size. One can identify trends that a raw financial statement might not reveal by using financial statements of a common size.

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1 year ago

Offering regular customers discounts on products is know as a

Alexxx [7]

Answer:

External customer incentives

Explanation:

External customer incentives are similar to customer incentives. The phrase external distinguishes between internal customers or company employees and other customers who chose to buy the company's products.

Customer incentives are offers given to customers by a company to attract and retain them. Businesses use incentives to convert potential customers into paying clients. Discounts are an example of external customer incentives. They are used when a business faces competition from similar products by other companies. Business also offer end of the year, anniversary, and other seasonal discounts.

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3 years ago

Park Company reports interest expense of $340,000 and income before interest expense and income taxes of $6,120,000.(1) Compute

algol13

Answer: 1. 18 times

2. Park is in better position

Explanation:

1. Times interest earned is a financial ratio that measures interest coverage. It's essentially to check if a company can pay it's debt payments and is calculated by either EBIT or EBITDA divided by the total interest expense. The higher the better and anything above 2.5 times is usually considered.

Calculating would therefore be,

= $6,120,000 /$340,000

= 18 times.

2. As mentioned in the first answer, for the Times interest earned, the higher it is, the more favourable it is. So Park Company will be considered safer and are most definitely in a better or worse position than its competitor to make interest payments if the economy turns bad. The fact that theirs is 18 means that they can pay off their interest expense 5 times more than their competitor who can only repay 12 times.

If you need any clarification do comment.

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3 years ago

El Toro Corporation declared a common stock distribution to all shareholders of record on June 30, 20X3. Shareholders will recei

Natasha2012 [34]

Answer:

This distribution is not taxable since Raoul is not earning any money at all (dividend income = $0), but the tax basis on the stocks that he holds will vary.

Before the distribution, Raoul had 310 shares, each share with a $60 tax basis. After the distribution, Raoul will have 465 shares, each share with a $40 tax basis.

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3 years ago