Although common stock represents a riskier investment to an individual than do bonds,in the sense of exposing the firm to the risk of bankruptcy,bonds represent a riskier method of financing to a corporation than does common stock.

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Bonds represent a riskier method of financing to a corporation than common stock because they come with a fixed interest rate that must be paid regardless of the company's performance. Additionally, if the company defaults on its bond payments, it may have to declare bankruptcy. On the other hand, common stock represents ownership in the company and does not come with a fixed interest rate or maturity date. While common stockholders are exposed to the risk of bankruptcy, they also have the potential to earn higher returns if the company performs well.

Although Common Stock Represents a Riskier Investment to an Individual