Bonds & Stocks Notes
What do we have to know about bonds & stocks?
- Bonds= Loans
- Stocks= You own
What are bonds?
- Bonds are loans, or IOU's, that represent debt that the government or a corporation must repay to an investor.
- Bond holder has NO OWNERSHIP of company.
First: If a corporation issues & sells a bond?
- It is liability
- It is asset
If the interest rate falls the percent value of the bond INCREASES
If the interest rate rises the percent value of the bond DECREASES
Stock owners can can earn a profit, the higher to dividend.
- Dividends, portions of a corporation's profit, are paid out to stockholders. (The higher the corporate profit, the higher the dividend).
- A capital gain is earned when a stockholder sells stock for more than he/she paid for it. A stockholder that sells stock at a lower price than the purchase price suffers a capital loss.
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