GBS151 Chapter 16 REVIEW QUESTIONS 1-5 - -Each new bond has...

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Chapter 16: Managing Finances REVIEW QUESTIONS 1-5 Page 438 1. Explain the concept of the time value of money. Principle that invested money grows, over time, by earning interest or some other form of revenue. 2. What do mutual funds and exchange-traded funds offer, and how do they work? They offer attractive investment opportunities for various financial objectives and often do not require large sums of money for entry. Mutual funds are created by companies that pools cash investments from individuals and organizations to purchase a portfolio of stocks, bonds, and other securities. Exchange-traded funds are a bundle of stocks or bonds that are in an index that tracks the overall movement of a market but, unlike a mutual fund, can be traded like a stock. 3. Identify the various characteristics of corporate bonds. -A bondholder has no claim to corporate ownership
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Unformatted text preview: -Each new bond has a bond indenture-An important point for a bond is its maturity date-Bond default 4. How does the market value of a stock di±er from the book value of a stock? A stock’s real value is its market value, the current price of a share in the stock market. ±he book value for a share of common stock is determined as the ³rm’s owners’ equity divide by the number of common shares owned by all shareholders. 5. How do ³rms meet their needs through debt ³nancing and equity ³nancing? Debt ³nancing long-term borrowing from sources outside the company via loans or the sale of corporate bonds is a major component in most U.S. ³rms’ ³nancial planning. Equity ³nancing looking inside the company for long-term funding is someTmes preferable....
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