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Day 38 ….. 3/24

What two ways – other than bank loans - do companies acquire funding?. Stocks and Bonds. Day 38 ….. 3/24. Government Bonds. Savings Series EE – no interest along the way Series HH – pay interest along the way NON-marketable. Treasury T-bill – last less than 1 yr

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Day 38 ….. 3/24

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  1. What two ways – other than bank loans - do companies acquire funding? Stocks and Bonds

    Day 38…..3/24

  2. Government Bonds Savings Series EE – no interest along the way Series HH – pay interest along the way NON-marketable Treasury T-bill – last less than 1 yr T-notes – 1 to 10 yr T-bonds – 10< Marketable
  3. Municipal Sold by states, cities and counties. Marketable Some are exempt from certain taxes Usually receive lower interest rate
  4. Corporate Bonds Why not use loans instead? May be risky. Many are sold before they mature.
  5. Income from Bonds Coupon rate = bonds interest rate Interest may be paid twice a year (6 months) Repayment StraightCallablePuttable
  6. Straight – On maturity date Callable – Issuer can “take back” in order to re-sell at lower rate Puttable – Lnder can ‘take back” agreement and invest your money elsewhere.
  7. Pros and Cons Pros Unmatched reliability Help to meet long-term goals Perform well in poor economy Cons Fluctuating rates Default Bond Rating
  8. Basic Bond Table How much others are willing to pay for $100 of bonds value What bid price and coupon rate could bring you over the time period
  9. Day 39…..3/25 What are the elements of a bond that determine its income potential? Coupon Rate, Maturity Date, Face Value
  10. Stocks IPO – Initial Public Offering investment bank / brokerage house determines Secondary market stock market
  11. Making money…..no guarantees Dividends Only paid when company makes profit Decided by B.O.D. Usually paid in cash Issued on ¼ basis (every 3 months) Blue-Chip companies (those that pay regular dividends)
  12. Capital Appreciation Stock becomes worth more than you paid for it. KKD stock purchase for 5.97 now valued at 18.04. 100 shares would have made you $1207.
  13. Stock Split Announced by B.O.D. You receive more stock for each share you own; 2 for 1 or 3 for 2. Holdings value remains the same, but each share diminishes in value. 100 shares of stock at $10 share 2 for 1 split = 200 shares Share value down to $5 $1,000 investment either way
  14. Why Split Stock? More liquidity Attract buyers Existing investors like increased shares
  15. Stock Exchanges two major ones NYSE – New York Stock Exchange 1.5 billion share > $45 billion traded daily NASDAQ – Nat’l Assoc. of Securities Dealers Automated Quotation System World’s first to conduct online trades 1971
  16. Factors Affecting Stock Prices Simply S & D What drives demand?
  17. Types Of Stock Cap Size – Market Capitalization Large-cap companies worth over 8b Mid-cap between 1b and 8b Small-cap less than 1b
  18. Growthsales / earnings grow at high ratessmall or no dividends (reinvestment) ideal for long-term investment Income reputation of high dividends mature company (not as much growth) still profitable high dividends, low risk investment Value good bargains overlooked / trading at lower- than-average prices expected to appreciate over long term investors with time and patience
  19. Domestic / Foreign (diversification) Economic Response Cyclical response to current state of economy construction Defensive Stocks do well regardless of economy food, pharmaceuticals, utilities
  20. Speculative young companies high risk, high reward penny stocks
  21. Stock market index Dow Jones Stock prices of 30 largest companies Best indicator S&P 500 (Standard & Poor’s) broader; 500 companies considered most accurate NYSE Composite Index averages prices. 15 sec. NASDAQ Composite Index many tech companies
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