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b. Is a buyer of a bond a
lender or borrower? Stocks Around
In February 2005, 11,000
investors from 22 countries met
at the World Money Show in
Orlando, Florida, to get investment
advice from advisers from around the
world. In a global economy, as opposed to a national
economy, investors set out to find the best return for
their money—no matter where that may take them.
One easy way to accomplish this goal is to purchase
ADRs, which stands for American Depository Receipts.
An ADR is certificate issued by a U.S. bank; the ADR
represents a specified number of shares (or one share)
in a foreign stock that is traded on a U.S. stock
exchange. Envision a world where anyone can easily
buy stock issued by any company in the world. In other
words, it is as easy to buy stock issued by a company in
your hometown as it is to buy stock issued by a company in Moscow.
Why might it make more sense to sometimes buy a Brazilian or Italian stock
instead of a U.S. stock? Would you predict that the rates
of return for all stocks (around the world) would be
THINKING funds that they would like to invest. As a
result, society ends up with more goods and
services than otherwise would be the case. 3. If the face value of a bond
is $10,000 and the annual
coupon payment is $600,
then what is the coupon
4. If the annual coupon
payment is $500 and the
price paid for the bond is
$9,544, then what is the
yield? Critical Thinking
5. “If you can predict interest rates, then you can
earn a fortune buying and
selling bonds.” Do you
agree or disagree? Explain
your answer. Applying Economic
6. Why might a person purchase an inflationindexed Treasury bond? Section 2 Bonds 449 16 (428-459) EMC Chap 16 5/8/06 5:11 PM Page 450 Focus Questions
What is a futures contract?
Why do people enter into futures contracts?
What is a currency futures contract?
What is an options contract?
What is a put option?
What is a call option?
What is the major reason that an investor
would decide to make use of eith...
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This document was uploaded on 01/16/2014.
- Winter '14