Distinction between debt and equity instruments, International Economics

Q. Why is it useful to make a distinction between debt and equity instruments?

Answer: Debt instruments such as bank deposits and bonds are repaid regardless of economic circumstances. Equity instruments for example a share of stock have a payoff that is linked to economic performances. Though remember the possibility of bankruptcy and the real return which is subject to domestic currency fluctuations.

Posted Date: 6/29/2013 3:25:42 AM | Location : United States

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