Initial question: Compare and contrast two types of leases and describe the advantages and disadvantages of each. Which type of lease would produce the lowest risk?

Classmate response: Respond to this post

Investment in stock requires one to understand the different types of stock that are available in the market and the various features of each of the stock in the market. Common stock and preferred stock are the two main types of stocks that a company will issue to the investors. ( Jordan, 2014) . Each of these stocks have different features and terms assigned to them that allow investors to choose the stock that best meets his or her preferred needs. To aid in the decision making regarding the stock the investors should invest in the analysis will focus on important features such as dividend payment, precedence payment terms, level of access in bankruptcy and dividend situations, and most importantly the risk and reward relationship. (Jordan, 2014) .

Often the decision between investing in common and preferred stock focuses on the risk and reward relationship. Investment in common stock in essence exposes the investor to a lot of risks although they deliver appreciation and dividend yields. (Smith, 2015) . In common stock, dividend payment can change over time and this may make it hard to predict cash flows. On the same note, holding common stocks comes with preemptive rights of ownership to a company although in the event of uncertainty, the common stock holders are the last to be paid. Preferred stock will be the most preferred based on the features highlighted. The value of investment in preferred stock thus varies depending on the features and terms settled on. With preferred stock, the investor has first access when it comes to dividend payments and in the event of bankruptcy. With preferred stock investment, the investor has redemption rights in which the investor can redeem the stocks at favorable prices for cash. ( Smith, 2015) . These features are important to be considered by the investor at the same time incorporating the level of risk tolerance.

References

Jordan, B. (2014). Fundamentals of investments . McGraw-Hill Higher Education .

Smith, E. L. (2015). Common stocks as long term investments . Pickle Partners Publishing.