for UNKLAB's macroeconomics students, i'm sure that your teacher will be give you this as an assignment!
here's for you:
STOCKS
The capital
stock (or just stock) of a business entity represents the original capital paid
into or invested in the business by its founders. It serves as a security for
the creditors of a business since it cannot be withdrawn to the detriment of
the creditors. Stock is distinct from the property and the assets of a business
which may fluctuate in quantity and value. Stock typically takes the form of
shares of either common stock or preferred stock. As a unit of ownership,
common stock typically carries voting rights that can be exercised in corporate
decisions. Preferred stock differs from common stock in that it typically does
not carry voting rights but is legally entitled to receive a certain level of
dividend payments before any dividends can be issued to other shareholders.
BONDS
In finance,
a bond is a debt security, in which the authorized issuer owes the holders a
debt and, depending on the terms of the bond, is obliged to pay interest (the
coupon) to use and/or to repay the principal at a later date, termed maturity.
A bond is a formal contract to repay borrowed money with interest at fixed
intervals. Thus a bond is like a loan: the issuer is the borrower (debtor), the
holder is the lender (creditor), and the coupon is the interest. Bonds provide
the borrower with external funds to finance long-term investments, or, in the
case of government bonds, to finance current expenditure.
Summary
Bonds and
stocks are both securities, but the major difference between the two is that
(capital) stockholders have an equity stake in the company (i.e., they are
owners), whereas bondholders have a creditor stake in the company (i.e., they
are lenders). Another difference is that bonds usually have a defined term, or
maturity, after which the bond is redeemed, whereas stocks may be outstanding
indefinitely. An exception is a consol bond, which is a perpetuity (i.e., bond
with no maturity).
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