What are bonds, stocks and project? What makes them similar and what makes them different?
Point of difference |
Bond |
Stock |
Meaning |
Bond is a security that promises that payer a fixed interest and principal payback after some time |
Stock is the a security that raised capital for the firm and is carrying ownership interest |
return |
Interest |
Dividends |
Holders right |
Holder has no right on the company |
The holder has ownership rights to the company |
Payment guarantee |
Holder has the guarantee of principal and interest payment |
The holder doesn’t have any payback guarantee. |
Decision making |
The holder is not involved in management and decision making of the company |
The holder has the right to make decisions in the company |
Voting rights |
The holder doesn’t have any voting rights |
The holder has the voting rights |
Risk |
Low risky method and so comparatively low return |
High risk and so higher return |
Now Project Bonds:
Similarity:
The only similarity they have: All these are the kind of security that are used to raise funds.
What are bonds, stocks and project? What makes them similar and what makes them different?
1. How are stocks and bonds similar, and how are they different?
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FINA Company's assets are $750 million, financed through bank loans, bonds, preferred stocks, and common stocks. The amounts are as follows: Bank loans: $ 100 million borrowed at 3% Bonds: $280 million, paying 8% coupon with semi- annual payments, and maturity of 10 years. FINA sold its $1,000 par-value bonds for $970 and had to incur $20 flotation cost per bond. Preferred Stocks: $120 million, paying $15 dividends per share. FINA sold its preferred shares for $220 and had to...
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