Which Is Better, Equity Investment or Debt Investment?

Take a few minutes to ponder the way the two investment alternatives answered the three questions. If you were advising Charlene, which investment would you suggest she make? If you were the one with the $500,000 to invest, which alternative would you choose?
On the surface, it appears to be no contest. Although the answer to Question 1 was essentially the same for both alternatives, the debt investment alternative is much more certain in its answers to Questions 2 and 3 than is the equity investment alternative. So why would Charlene (or anyone, for that matter) even consider the equity investment as an alternative? The one-word answer to that question is POTENTIAL!
Although risk is associated with any investment, equity investments are inherently riskier than debt investments. With the additional risk, however, comes the potential for greater reward.
Assume that the following events happen during the five-year period of Charlene's two investment alternatives in Weatherman Corporation. The company earns net income each year of $10 million for the next five years. If Charlene chooses the bond alternative, she will receive $20,000 interest every six months for five years and then will receive her $500,000 back. But what if Weatherman’s net income turns out to be $100 million each year for the next five years, or even $1 billion each year? How will that affect Charlene’s return if she purchases the bonds? The answer is that it does not matter how profitable Weatherman is, Charlene will only receive $20,000 every six months, plus the return of her $500,000 when the bonds mature after five years.
If Charlene chooses to buy the 10,000 shares of stock, however, the return on her $500,000 investment will be very different if Weatherman earns $1 billion profit each year than if the company earns $10 million or