Securities Market

Securities Market - 10-17-07: The Securities Market...

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10-17-07: The Securities Market Financial Opportunities: Facing firms Bonds o Certificate indicating that the company has borrowed a given sum of money and agrees to repay it with interest o The written terms of the agreement is called an indenture o There is no transfer of ownership since it’s a debt o Bonds are rated in terms of risk Example Face value = $1000 Interest rate = 10% Yield- actual market value o Buy above face value (premium $1100) Actual yield is less than stated o Buy below face value (discount $990) Actual yield is more that stated o Biggest issuer of bond is government Japan owns most of bonds outside domestically o Types of Bonds (don’t need to know def. of these) Secured Unsecured Callable Convertible Junk bonds Sinking fund…many more variations o Why buy bonds From firms POV Same as pros/cons of debt From investors POV Pro o Fixed income (interest) each year o Safer than equity since liquidation preference
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Securities Market - 10-17-07: The Securities Market...

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