1 / 17

High School Financial Education Program Florida International University College of Business

High School Financial Education Program Florida International University College of Business Capital Markets Lab http://business.fiu.edu/cml 305-348-1542. Stocks and Bonds. What is a Stock?. What is a Stock. Ownership interest Equity Securities, Shares, Common Stock, Publically Traded

jace
Download Presentation

High School Financial Education Program Florida International University College of Business

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. High School Financial Education Program Florida International University College of Business Capital Markets Lab http://business.fiu.edu/cml 305-348-1542

  2. Stocks and Bonds

  3. What is a Stock?

  4. What is a Stock • Ownership interest • Equity Securities, Shares, Common Stock, Publically Traded • Proportion of Assets, Profits, and Dividends • Keeps investors concerned with: • Business model, Earnings potential, Debt structure, Product line, etc.

  5. How does a Stock differ from a Bond?

  6. Debt v. Equity • Creditors, Equity Investor • Entitlements: fixed income versus earnings, guarantees and expectations • Rights • Contract connected to bond • Shareholder voting power on firm’s decision • Board, M&A, conflicts of interest

  7. Risks • Both affected by financial health and survival • Bankruptcy claims, downside risk • Returns • Bonds • Specified interest rate to lend, adjusted by market (yield) • Stocks • Speculated yield, not promised • Risk/Reward

  8. Why do Investors Purchase Stock?

  9. Capital Appreciation • “Buy low, Sell High” • Infinite amount of variables to move stocks and change businesses

  10. What are the downside risks to investing in stocks?

  11. Return on stocks have higher degree of uncertainty • Bonds can be held to maturity. • Returns are path dependent for stocks • Systematic and Unsystematic risk • Firm Specific • Market • Burger King v. McDonalds

  12. What is the relationship between risk and expected return?

  13. Risk-free securities • Why Risk Free? • Capital Asset Pricing Model (CAPM).

  14. How does a risk-averse investor feel about risk and expected return? • Risk Tolerance depends on: • Lifestyle • Age • Young v. Old • Income • Low Income v. High Income • Health • Sickly (high medical costs)v. Healthy • Expectations • Safe v. Risky Investments

  15. How can diversification reduce risk?

  16. “Don’t put your eggs in one basket” • Unsystematic risk reduction through diversification • Burger King v. McDonalds example

More Related