A difference between a share of stock in a corporation and a corporate bond is that?

Question

A.the bond owner has voting rights within the corporation whereas the stockholder does not.

B. the bond owner is entitled to receive a fixed annual coupon payment plus a lump-sum payment at the bond's maturity date, whereas the stockholder is entitled to a share of future profits.

C. the share of stock is a legal claim while the bond is not.


D. stocks are issued in return for funds that are lent to the corporation.

Answer 1

B

Answer 2

well you have to know the differnce between stocks and bonds..

Stock holders or shareholders OWN the company

Bond Holders are Creditors..they LEND money to the company. Bond Holders NEVER have voting rights!!!
Common Shareholders DO have voting rights...
A BOND is a LEGAL CLAIM..the compnay is contractually obligated to pay back the bond...There is NO legal claim for shareholders....

stocks are NOT issued in returns for loans.. AS I said above. BONDs are issued in exchange for a loan.

Therefore we have illiminated A, C, D

The answer is B. However. there is a bit of an error in B.
Bond holders are legally entitled to be paid back every cent, Plus interest. As I stated above, there is no legal obligation of the company to give the shareholders anything..therefore the second half of B, the shareholders are ENTITLED to future earnings is misleading. They are not entitled to anything, except the ability to vote for the board of directors of the company. By definition then, Stocks are much riskier than Bonds.

Answer 3

Stock (Common Stock) represents ownership of a company, based on the ratio of the amount of stock issued versus the amount held .

Bonds represent debt owed to the Bondholder and may or may not receive interest .

Answer 4

B