Stocks-and-Bonds.docx

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1、StocksandBondsSomepeoplearccontenttolimit(heirinvestmentprogramstosuchsafeinvcsnwnsassavingsaccountsandsavingsbonds.Theytakecomfortinknowing(hatwhilehereturnfromsuchinvesimencsmaybesmall,itisSleadyandsure.OtherpeopleseekinvestmentsIhalinvolvehigherrisks.TheyunderstandthattheamxntofmoneyaninveMnenlre

2、turnsisfrequentlyrelatedIotheamountofriskitinvolves.Becausetheywanttoobtainthegreatestpossiblereturnoneachdollarinvested,theyarcwillingtotakecertainchances.StillanothergroupCfpeoplewantbsethatinvolvesecurities.Securities,whichisageneraltc11nforstocksandbonds,arcsoldbygovernmentsandcorporationsinorde

3、rtoraiselargeamountsofmoney.TherearcthreewaysinWhiChbusinessesthatneedagreatdealofmoneyforalongperiodoftimecanobtainthatmoney.Theycango(oabankandapplyforalong-termloan.Theycanusethexofisof(hebusiness.ButbanksareoftenreluctantolendlargeamountsforperiodslongerthanOnCOrtwoyean.Andprofitsarcordinarilyno

4、llareenoughlGnancenylhingveryexpensive.IhcrcforcwheneverbusinessesorgovernmentsneedfinancingformajorprojectsOrforgrowththeymustraisethemoneythroughthesaleofsecurities.BondsAbondislikeapromissorynote.CXCCpe11s(ohelpPayforimprovementssuchasStrcclS.schools,andpublicbuildings.Corporatebondsareissuedbybu

5、sinessesIoraisemoneyforexpansionandgrowth.ThCdenominationisthesumofmoneythatthebondrepresents.Thissumisprintedonthebond.hcinterestrateissetatthetimeabondisissued.Itremainsthesameuntilthebondmatures.Thematuritydateofabondisalsofixed.Bondsmaybeissuedforsuchperiodsas10,20.or30years.SupposeyouboughtaS1.

6、0(K)bondal6percentinterestfor20years.Eachyearyouwouldreceive$60ininlereM(6percentofS1.(XM).Ihcinterestwouldprobablybepaidtoyouintwopayments.$3()everysixmonths.After20years,thebondwouldmature,andyouwouldreceive$I,(XM-(hepriceyoupaidwhenyoufirstboughtthehood.BondsmaybeeitherregisteredOfbearerbonds.Are

7、gisteredbondisabondIhalhasthenaneof(beownerrecordedwiththeissueroflhebond.Interestismaileddirecllyl(hepersonregisteredastheowner.AbearerbondiseHbondwithmongage_.StocksAsabondholderyouarcacreditorof,orlenderto,abusinessfirmorgovernnnunit.Asastockholder,however,youarconeof(heownersofacorporation.Stock

8、representsaShanJofownershipinacorporation.Astockholdernayownoneshareormanysharesofacorporation*sslock,andeachshare11uycostseveraldollarsrseveralhundreddollars.Uponpurchaseofastock,astockholderreceivesastockcertificate,aprintedtb11nthatstatesthenumberofsharesapersonownsinacorporation.Ybucanbuyeitherc

9、ommonorpreferredstock.Comnonstockisstock(hatpennitsownersovoofcommonstockshareindirectlyinthemanagementofthecorporationbyvolingforthedirccun;.whoinIumappointsthepeoplewhomanagethecorporation.AlthoughthereisgreaterriskinowningcommonStOCkthaninowningpreferredstockorbonds、thereisalsothechanceofagreater

10、returnonyourinvestment.Dividendsforcommonstockarcsetbythedirectorsof(hecorporationaccordingloIheamountofxfit.Ifprofitsarehigh,dividendsofCommOnstockcanbemuchhigherthanforpreferredslock.Ifprofitsarelow.dividendsmanynotpaidIoholdersofcommonsslock.Forthisreason(hepricefsharesofcommonstockchangesmorerap

11、idlythanthepriceofpreferredstock.PreferredMockisstockwithfirstclaimonthecorporalion,searningsandassetsaftertheclaimsOfbondbokiCrs.PrCfCrrCdstockholdersdonothavevotingrightsinthecorporation.Prefen,elstockdividendsareusuallysetWhelIlhestockisfirstsoldandNmain(hesamethereafter.Thismeansthatifthedividendisseiat$6pershare,preferredstockholderswillusuallyreceivethissanamounteachyear.PreferredstockdividendsmustbepaidbeforeCommonStoCkdividendscanbepaid.Sincethedividendremainsthesamefromyeartoyear,preferredstockisusuallymorestablein