Stocks differ from bonds because ________.
A)bond cash flows are known while stock cash flows are uncertain
B)firms pay bond cash flows prior to paying taxes while stock cash flows are after tax
C)the ending par value of a bond is known at purchase while the ending value of a share of stock is unknown at purchase
D)All of the above

Question

Quizplus · Accepted Answer

All of the above statements are true and highlight the main differences between stocks and bonds. Bonds have a fixed par value that is known at the time of purchase, and the cash flows are usually fixed with a specific maturity date. Conversely, stock cash flows are highly uncertain and dependent on the company's performance, with no guarantee of future cash flows. Additionally, bonds often have preferential treatment in terms of receiving cash flows before taxes, while stockholders receive cash flows after taxes.

Stocks Differ from Bonds Because ________