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QUESTIONS TEACHER MIGHT ASK. HE IS USING ESSENTIALS OF INVESTMENTS BY BODIE, KANE, MARCUS Why do...

QUESTIONS TEACHER MIGHT ASK. HE IS USING ESSENTIALS OF INVESTMENTS BY BODIE, KANE, MARCUS

Why do we need both debt and equity markets? That is, why are stocks important if we have loans/bonds? Both allow you to invest in corporations don’t they? What are the big differences?

Why is it important to understand how indexes are created and calculated? What would it mean for instance, if an equally weighted index of a large basket of stocks has a significantly higher return than a value weighted index of the same basket of stocks?

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Debt market provides you guaranteed return on your investment with security to your principle or investment, where as equity market provides no guaranteed returns, and there is no guarantee to your investment, but it provides ownership theoritically.

You can invest in any or both of these markets. But the one who can take risk, can invest in equity market, the one who is risk averse can invest in bond market.

Index can be created by the Exchanges themself by selecting some companies with them. They will give some weightage to each of the firms in the index and according to the changes in their market price, the index value also changes.

The stocks which are blue chip and doing better in market, provided higher chances to get returns than those which do not comes under blue chip companies.

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