Question

Explain the main difference between a bond and a common stock.

Short answer

Stocks give you some of the ownership of the company, but bonds are loans from you to the company or the government.

Step-by-step solution

Step. 1 Introduction

Financial markets are specialized markets for trading securities such as stocks, bonds, currencies, bills and checks, and derivatives.

Step. 2 Explanation

Stocks (also known as equity) are securities that represent ownership of a portion of a company. Some companies provide dividend to their shareholders.

A bond is an instrument used by organizations to raise capital. Different types of bonds can be corporate bond, government bond, etc. A bond is an agrrement that the organization owes the lender topay them interest and the principal amount on the maturity of bond.