Which of the following explains how stocks and dividends work as financial investments? (1 point)
Responses
a Stocks are debt instruments issued to investors. They function in a similar way to loans in that a stock-issuer sells a stock to raise funds, paying the investor back in both interest and principal over the course of time. The interest paid to the bond holder is called the dividend.
b Stocks are accounts in which investors can choose to put their money. The investor agrees to deposit their funds into the stocks, and the stock issuer will offer a determined interest rate while the funds are held. The interest paid to the stockholder is called the dividend.
c Stocks are created from any goods (such as gold, land, or vintage items) that are expected to increase in value over time. When an item is sold for a profit, the profit is taxed in the form of a dividend.
d Stocks are shares of ownership in public corporations. By purchasing shares of ownership, the investor agrees to pay the market value for the stocks and in return receives partial ownership in the corporation. Corporations will frequently distribute their profits to stockholders in the form of dividends.