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Investment in bonds and stocks

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Following is a good comparison of stocks and bonds.

Bond Common Stock

Bondholders are creditors
Stockholders are owners

No voting rights exist
Voting rights exist

There is a maturity date
There is no maturity date

Bondholders have prior claims on profits and assets in bankruptcy
Stockholders have residual claims on profits and assets in bankruptcy

Interest payments represent fixed charges
Dividend payments do not constitute fixed charges

Interest payments are deductible on the tax return
There is no tax deductibility for dividend payments

The rate of return required by bondholders is typically lower than that required by stockholders
The rate of return required by stockholders is typically greater than that required by bondholders

What type of investor would benefit most from stocks? From bonds?

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Solution Summary

Answers what type of investor would benefit most from stocks and the type that would benefit from bonds.

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What type of investor would benefit most from stocks? From bonds?

Investors who invest in bonds have a limited risk with a limited return, while Stockholders are risk takers who forgo security for higher potential return. People invest in bonds to have predictable interest ...

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