Thursday, February 29, 2024

Which Of The Following Statements About Stocks Is True?

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Which of the following statements about stocks is true? Here we will discuss some statements about stocks that are true and some false.but before if we have given some option to choose like.

Which of the following statements about stocks is true?

a. Owners of stock securities are actual owners of the firm.

b. Stocks have a maturity date.

c. Owners of stock securities are guaranteed a return on their investments.

d. Only institutional investors can own stock securities.

e. Stocks represent a debt to be paid.

Correct answer will be a. Owners of stock securities are actual owners of the firm.

Let’s see one by one why other options are not correct so that you will get an answer without any doubt in your mind.

b. Stocks have a maturity date.

This is incorrect because stocks have no maturity date. A maturity date is the day on which a debt instrument, such as a bond, must be paid off. Stocks are equity instruments, not debt instruments. They show ownership rather than debt. Stocks do not have a set repayment date, but they can be sold in the market at any moment.

c. Owners of stock securities are guaranteed a return on their investments.

This is untrue since stocks do not guarantee profits to investors. Stocks are high-risk investments that can result in losses if the firm performs poorly, the market falls, or the investor sells the stock for less than the purchase price.

d. Only institutional investors can own stock securities.

This is untrue because everyone, not just institutional investors, can own stock securities. Institutional investors are huge organizations that invest large sums of money in the stock market, such as banks, mutual funds, pension funds, or insurance firms. Individual investors, like you and me, can, however, purchase and sell stocks through brokers or internet platforms.

e. Stocks represent a debt to be paid.

This is incorrect since stocks do not represent a debt that must be paid. Stocks, as previously said, are equity instruments, not debt instruments. They show ownership rather than debt. Stocks do not have to be repaid by the company, but they can be sold on the market by the investor.

Some true statement about stocks :

●  The value of stocks can rise or fall based on market supply and demand, the company’s performance and prospects, and the country’s and the world’s economic and political conditions.

●  Stocks can be classified as common or preferred, growth or value, large-cap or small-cap, and so on, based on their qualities and attributes.

●  Stocks can give income to investors through dividends, which are payments provided to shareholders from the company’s profits, or capital gains, which are profits obtained by selling the stock at a higher price than the purchase price.

●  Stocks are always profitable for investors. Stocks are high-risk investments that can result in losses if the firm performs poorly, the market falls, or the investor sells the stock for less than the purchase price.

●  Stocks and bonds are the same thing. Stocks and bonds are two kinds of securities that reflect distinct types of claims on a corporation. Stocks provide investors with ownership rights as well as prospective profits, whereas bonds provide investors with creditor rights as well as fixed interest payments.

Read Similar Question: When Moving To A New Rental, You’ll Likely Need To Pay A Security Deposit. How Much Is This Often?

Conclusion:

Stocks are a popular and essential sort of investment that can provide investors with a variety of benefits such as ownership rights, dividends, and capital gains. However, stocks include a number of hazards, including market volatility, corporate performance, and investor behavior. As a result, it is critical to comprehend the genuine and false assertions about stocks, as well as how they effect the value and return on your investment.

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