CH9-10 - 11/6/2008 Inflation + Interest rates Real 3 months...

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11/6/2008 Inflation + Interest rates Real 3 months T-bill rate = real 3 months French government bond rate CH9 Stock Market Role of the stock market - Provide liquidity for share of business - Determines value of company (Share Price X # of shares = market value of business) - Allows businesses in need of funds to obtain them from those with excess funds (suppliers) - Rights to cash flow from business (Dividends) Primary (IPO) Secondary (Liq + Price Discovery) Shares - Common shares – Dividends, Variable - Preferred shares – Dividends usually fixed a. if dividends missed, no bankruptcy (Default) Priority - government (taxes) - Bond - Preferred - Common – Claim on residual value / cash flow of business Example Question 9.1 Bought stock 3 months ago for P = $30 Received dividend Dt = $0.15 today Sold Stock for Pt = $32 today Example 2 9.2 Bought stocks for $28 last month, sold it today for $25, received dividend of $0.20 today. Initial Public Offering (IPO) Usually when a new business goes public.
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IPOs are handled by investment bankers - Prepare documents - Road show: market
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CH9-10 - 11/6/2008 Inflation + Interest rates Real 3 months...

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