Questions On Stock And Corporate Bonds

Investing money is a major means of generating extra cash that people often participate in. A stock market is a place where investors trade certificates of partial ownership in businesses for a set price. “Through these transactions, companies can raise the initial capital necessary for various aspects of operation, and those who buy the certificates become entitled to a portion of the business' assets and earnings (Kelsey).”

Week 1 – Introduction – Financial Accounting (Review) Week 2 – Financial Markets and Net Present Value Week 3 – Present Value Concepts Week 4 – Bond Valuation and Term Structure Theory Week 5 – Valuation of Stocks Week 6 – Risk and Return – Problem Set #1 Due Week 7* – Midterm (Tuesday*) Week 8 - Portfolio Theory Week 9 – Capital Asset Pricing Model Week 10 – Arbitrage Pricing Theory Week 11 – Operation and Efficiency of Capital Markets Week 12 – Course Review – Problem Set #2 Due

Equity shares can be described more easily than fixed income securities. However, they are more difficult to analyse. Fixed income securities typically have a limited life and a well-defined cash flow stream. Equity shares have neither. While the basic principles of valuation are the same for fixed income securities as well as equity shares, the factors of growth and risk create greater complexity in the case of equity shares .

Introduces the concepts of finance. Reviews the basic tools and their use for making financial decisions. Explains how to measure and compare risks across investment opportunities. Analyzes how the firm chooses the set of securities it will issue to raise capital from investors as well as how the firm’s capital structure is formed. Examines how the choice of capital structure affects the value of the firm. Presents valuation and integrate risk, return and the firm’s choice of capital structure.

It has been established that it is crucial to be able to properly value a bond for finance. Two companies have been chosen to represent this action for this document Apple Inc. as well as IBM which are both in the technology sector and have long term debt, have bonds and also stocks available for sale. We are going to determine the length until maturity, the yield to maturity and then also the price of the bond today. While keeping this information in mind we can determine what time value of money illustrates about each bond. A credit rating has been assigned to each company and we can determine which company may be the better investment for the bank as well as the investor. In the

Financial theory accepts the belief that a share’s return should be proportional to the risk received by its holder. There is a need of a risk-return equilibrium model. Since the nativity of the efficient market hypothesis (EMH), an equilibrium model was only the Capital Asset Pricing Model (CAPM). The CAPM constitutes of two types of returns, the risk free rate of returns of the Treasury bills and beta times the return on the market portfolio. The following equation is the basis of this model:

Bonds are built on debt instead of equity. They promise to pay the principal amount of the bond on a specific date. So basically, it makes the owner a lender and only pays interest to the owners/bondholders. It also requires that the owner pay a fixed interest payment every six months. A large majority of corporations do not issue bonds.

Corporations issues different types of stocks to meet internal requirements and to satisfy public demand. According to wiki.fool.com, "...companies access the public markets to raise funds for expansion and debt repayment...each of the different types of stock represent a form of ownership."

As capital markets analysts, it is our sole duty to ensure the happiness of our clients and investors through rigorous financial models of a particular company’s stock for the purpose of forecasting its future trends, and ultimately leading to a recommendation of whether that particular stock should be bought or sold. In the general sense, a successful long-term investment strategy involves the following characteristics: selecting a comprehensible investment, investing early and taking appropriate risks, establishing a cash-flow plan, making stocks the central focus while also taking into account diversification, and achieving an effective balance by investing in bond funds for a safety net. It is also imperative to use tax advantaged investment

Understanding how to properly value a vanilla bond is essential for finance (ctuonline.edu). In theory, the present value relationship determines the value of a bond, but in practice the actual price is (typically) determined by suggestions from other, more liquid mechanisms. The purpose of this work will be to research bonds offered by Safeway (SWY), analyze them, and then decide in what situation these bonds would be beneficial for the investor.

What exactly is a stock, anyway? Basically, stock is ownership, simple as that. Buy a share of APPLE Inc. and acquire a tiny sliver of the computer giant, tying the investments fate to that of the Chairman, for better or worse. This is ownership in the most literal sense: You get a piece of every desk, contract and

INSTRUCTORS: PROF. S.K. BARUA PROF. J.R. VARMAACADEMIC ASSOCIATE: MS. VAISHALI SATTAREPORT PREPARED BYGROUP 12MEENAKSHI DEOGAM M. SHYAMNIMISHA SAXENARAGHAV YADAVROHAN ANANDDATE OF SUBMISSION: 24TH AUGUST, 2010

In the financial markets, the most common forms of marketable securities are stocks and bonds. Though they have some similarities to each other, they differ greatly in many aspects. Broadly speaking, both financial instruments enable one to invest in corporations, public and/or private, with possible profitable returns in the future.

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).

This act of issuing stocks is to obtain capital growth and by raising capital through the use of equity there are many advantages to the firm as well as several disadvantages. The value of stock is what the stock is worth and the stock market is a place where you can buy and sell shares of a company. If a firm needs extra money in order for their business to grow, it is possible for them to sell a share or the entire ownership of the firm in the form of stocks. Firms can benefit greatly from this act but some firms do not and their business ends up failing. Before a company considers issuing new stock it is crucial that the company has a solid management team, and capitalization displaying no more than twenty five percent debt and growth of at least ten percent annually. The best time to raise capital through the use of equity for your company is when the industry is growing rapidly and the company requires access to more capital and public recognition to fund its plans for growth, development and expansion.