Although common stock represents a riskier investment to an individual than bonds, bonds represent a riskier method of financing to a corporation than common stock.

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Bonds represent a fixed obligation to pay interest and repay principal, regardless of a corporation's financial situation, making them a riskier financing option for the company. In contrast, common stock does not obligate the corporation to pay dividends, offering more flexibility during financial downturns.

Although Common Stock Represents a Riskier Investment to an Individual