Discuss at least three differences between investing in stocks and investing in bonds
What will be an ideal response?
Answer: Students may discuss any of the following:
Bonds provide a predictable stream of income that will not change until the bonds mature, while stock dividends can be reduced or even eliminated.
Corporations have a legal obligation to pay interest and principle, but there is no legal obligation to pay dividends.
Stocks can lose value permanently, but the value of bonds will always rise (or fall) to face value when they mature unless the corporation fails and the bonds default.
Because bond prices depend primarily on interest rates, they move within a much narrower range and change less quickly than stock prices.
On the negative side, bonds values do not share in the growth of a company and over the long term, average returns on bonds are lower than on stocks. Under present tax laws, bond interest is taxed as ordinary income while stock dividends are taxed at a lower rate.
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Which of the following statements is TRUE of a bond that is issued at a premium?
A) The bond will be issued at an amount above face value. B) The stated interest rate is lower than the prevailing market interest rate. C) At maturity, the bond will repay an amount that is greater than the face value. D) The bond will be issued at par.
Which of the following would be thought of as a typical entrepreneur?
a. George W. Bush b. Homer Simpson c. Kofi Annan d. Richard Branson
If an individual is classified as an employee, the employer is required to withhold the employee's share of the FICA tax and to provide a matching amount.
Answer the following statement true (T) or false (F)
A shipment contract requires a seller to ship goods by a carrier
Indicate whether the statement is true or false