Lecture 6 - Announcements All of the information pertaining...

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Announcements All of the information pertaining to the BU111 Stock Market Competition is now posted on the course website (marking scheme, guidelines, registration instructions) The Competition begins Tuesday, October 12 and ends on Thursday, December 2
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Announcements There is an error in the solution set for Tax Problem Set #3 problem 5 The effective tax rate for dividends on page 218 should be 22.21% not 21.21%
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Effective Tax Rates 2010 Interest/Dividends/Capital Gains Taxable Income Combined Dividend CG'n Interest $ 0 - $ 37,106 20.05% 0.00% 10.03% 20.05% $ 37,106 - $ 40,970 24.15% 3.96% 12.08% 24.15% $ 40,970 - $ 60,407 31.15% 9.72% 15.58% 31.15% $ 60,407 - $ 72,658 32.98% 10.51% 16.49% 32.98% $ 72,658 - $ 74,214 36.27% 11.94% 18.14% 36.27% $ 74,214 - $ 81,941 39.41% 16.45% 19.71% 39.41% $ 81,941 - $127,021 43.41% 22.21% 21.71% 43.41% above $127,021 46.41% 26.54% 23.20% 46.41%
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Canadian Financial System Funds Required Debt Equity / Stocks Money Market - t-bills - short term gov’t notes - commercial paper - Gov’t bonds Banks Private placement - institutional investors Public sale OSC Over-the-Counter Market bonds/debentures, unlisted stock, mutual funds, Stock Exchanges Preferred &Common shares, Options (derivatives) Investment Dealers Agent vs. Principal Short term Long term Bonds
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Alternate Types of Investments Bonds: Definition A bond is a promise by the issuer or borrower (government or corporation) to repay an investor (the lender) a set dollar amount (the principal), at a set date (the date of final maturity), and to pay the investor a fixed rate of interest (the coupon rate) each year
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Characteristics of All Bonds Face Value Most bonds are initially sold at a face value (par value) of $1,000 per bond Length of Life/Date of Final Maturity Most bonds have a relatively long life from the time they are initially sold (issued) until the time that they mature (date of final maturity) This is referred to as the bond’s “run to maturity” or “life expectancy” and is normally 20 years
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However, some bonds may have a longer run to maturity (for example 30 years) or a shorter run to maturity (10 or 15 years) For the sake of simplicity, we will always assume that a bond will have a life expectancy (or run to maturity) of 20 years Date of Final Maturity At the end of it’s life, a bond is said to “mature” and the issuer will repay the principal ($1,000) to the holder of the bond
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Coupon Rate Each year the owner of a bond will receive a fixed rate of interest from the issuer of the
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This note was uploaded on 12/18/2010 for the course ECONOMICS 120 taught by Professor Mesta during the Spring '10 term at Wilfred Laurier University .

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Lecture 6 - Announcements All of the information pertaining...

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