Stocks and Bonds

So what does this really mean? It means if a company puts their stock up for sale on the market you can buy a partial ownership of the company. Your portion of ownership depends on the amount of shares you purchase in a particular company. When you purchase a share of the company you own that percentage of everything the company owns and makes and can have a decision on the company. The two most common types of stock are common, the typical traded stock that everyone is use to and comes with voting rights, and preferred, doesn't usually come with voting rights and typically offers some form of guaranteed fixed dividend forever. Features of stocks are easy to buy and sell, no guarantee of return, may make huge profits fast or lose value just as quick, requires monitoring. Stocks are traded on "The Market", meaning they have to be bought and sold through a stock market. With regulations just anyone can't buy or sell on the market, it has to be a licensed broker to carry out the transaction. Stock buying and selling can take a lot of time and research to make the most profit. If you can find a broker, you trust they can really help you with your investment. Stocks are one area of investment, more so than bonds, you need to be sure you can stand to lose the money if the market doesn't work

Double taxation: A corporation must pay income taxes on its profits, and then shareholders must also pay personal taxes on the dividends they receive from the corporation.

The “Stock Market” is a term that actually describes several markets such as the New York Stock Exchange NASDAQ, where the stocks of companies are traded. Shares in a company are sold and the shareholders then become part owners of the company. Offering shares of stock raises money for continued research and development of company products or services.

Financial Instruments A financial asset is something which is defined as an entitlement of future cash flows. However, a financial instrument is a broader term used to describe financial assets and other assets in which there are no organised secondary markets to trade them. However, a financial security is something that can be traded in a secondary market. Attributes of Financial Assets Financial assets are those that: • • • • Have a return of yield expressed in terms of percentage. Have risk in which there is probability the actual return will differ from the expected return. Are liquid in that they can be sold at current market prices with reasonable transaction costs. Are expected to have a set time-pattern of cash flows in or out.

For many people, the star market is a popular method for obtaining money quickly. Despite the risks, many people invest their money in stocks. The stock market allows the public to buy shares of a company, or a stock. These shares come in the form of an official document, and grants you a small fraction of the company you invested in. As companies do well, their stocks are worth more. Stocks can be bought and sold through the help of a stockbroker. The goal is to buy a share of a company, then later sell the share for more money than you bought it for. However, the market is risky; this is proven by multiple crashes in the market, resulting in loss of money.

Inflation rate risk, when inflation goes up, the price of the bond usually goes down.

Being a stockholder can have great rewards like a viable source of income, or an eggs nest for retirement, however it does have its downsides as well. Owning stock in a corporation bears the risk of losing all one’s investment if the company goes bankrupt. Aside from financial benefits, owning stock allows stockholders to have a voice (however small it may be) in the company’s direction.

Comparing each bond’s theoretical yield and price to its actual yield and price, we find that both bonds are underpriced. However, this alone is insufficient to conclude that an arbitrage opportunity exists, since our calculated theoretical prices ignore the effects of liquidity premium. As, in this exercise, we are unable to calculate what the true liquidity premium for each bond should be, we consequently do not have a true price for each bond to compare with and ascertain whether each bond is underpriced (ie. both the theoretical and actual prices may not be the true price). Nonetheless, we have calculated the implied liquidity premium for each bond as the difference between the theoretical yield and actual yield (see Table 1 above).

There are a few terms new stock investors should learn before actually beginning to put money into the stock market. You hear words like “shares”, “assets”, and even “earnings” when you watch or listen to people on the television. Shares are a percentage of the company, if you buy a share; you own a small percentage of it and its earnings. Earnings are all the money that the company makes. Assets involve all the company owns, for example, trademarks, equipment, and even the buildings their workers work in. Companies put their assets and

Though bonds provide such safety, their yields are very low and have little potential for capital appreciation in the long-run for both the issuer and receiver. Besides, the low interest-rate of bonds makes the return on holding cash virtually non-existent (Voya & Scotia, 2009). Convertible bonds, however, offer a middle ground between the safety of bonds and the upside potential, and risk, of stocks. For this firm seeking income, higher-yielding convertibles bonds are the right options they can explore. This allows for the downside protection of a

When you buy stock you are purchasing a part of a corporation. The ownership of the corporation is divided into shares of common

In fact, bond investments are carried out in several ways, depending on the type of bond:

Gittman (2004, pp. 312) divided stock into two types, such as common stock and preferred stock. He also showed that dividends are the outcome of investment. So, common stocks are an ownership claim against primarily real or productive asset (Higgins, 1995), but he also said that if the company prospers, stockholders are the chief beneficiaries, if it falters, they are the chief losers. Smith (1988) presented that stocks are one of the most popular forms of investment. People buy stocks for various reasons: some are interested in the long-term growth of their investment by buying low priced stock of a new company in the hope of substantially growth of share price over the next few years. Another reason he suggested that in a well established firm stockholders expect the stock growth will be stable over the long run. (Smith,1988).

In order to have an understanding of what the stock market is you have to have an understanding of what it’s built around, which are stocks. A stock also known as a share, is basically a small portion of a company. So if you purchase a stock and become a shareholder, you essentially own a piece of that company. Because of this, you also have

Buying shares means buying a slice of a company with the hopes you may one day be able to sell it for more than it is worth right now. Ideally, you are going to come up with your own investing strategy and/or process rather than just throwing your disposable/saved money into shares without any structure.