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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

What is a share of stock? What is a bond? Explain their differences and similarities.

To determine

The difference between a stock and a bond.

Explanation

Both the Stocks and the Bonds are the financial market instruments used by the people in the economy. Amongst them, the share provides the ownership right to those who owns them, whereas the Bond is an income investment which is fixed and thus it acts as a certificate of indebtedness. There are many matches between the Stocks and the Bonds. Both of them are financial instruments, used to raise capital to the firm, traded on exchange and both entail risks. There are many differences between the Stocks and the Bonds and some of the important ones are as follows:

(1) The Bond pays interest because the borrower of the loan of the issuer has agreed to pay the interest rate for the defined period of time in the bond...

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