Question

Elaine wants to buy and operate an ice-cream truck but doesn’t have the financial resources to start the business. She borrows $10,000 from her friend George, to whom she promises an interest rate of 7 percent, and gets another $20,000 from her friend Jerry, to whom she promises a third of her profits. What best describes this situation?

a. George is a stockholder, and Elaine is a bondholder.
b. George is a stockholder, and Jerry is a bondholder.
c. Jerry is a stockholder, and Elaine is a bondholder.
d. Jerry is a stockholder, and George is a bondholder.

Answer 1

d. Jerry is a stockholder, and George is a bondholder.

Step-by-step explanation:

A stockholder is an individual or company that owns a stock in a company. A stockholder contributes part of the capital needed in a business. A stockholder is usually paid dividends which is a percentage of profit and it is calculated based on capital contributed.

Jerry gives Elaine a part of the capital and would get a share of the profit, therefore, Jerry is a stockholder.

A bondholder lends a business money and is paid interest whether or not a company makes profit. Therefore, George is a bondholder.

I hope my answer helps you.