Question: hello please help with a response to the post below...
Hello, Please help with a response to the post below. Thank you!
Dear Professor and Classmates,
There are two factors: The present value of the coupon payments and the present value of the par value. The differences between bond and stock: Bond: Value raises and falls depending on interest rates. Interest payments are tax deductible by the corporation, equity is not lost through issuance, and unpaid debt is a liability. Also it can be issued at any time for any reason. Regarding stock, the value rises and falls depending on the value that the stock trades at on any given day, dividends are not tax deductible, stock issuance is based on transference of equity, loss of stock value creates no liability, and it can only be issued once.