Question

Stocks and Bonds Project

Overview: In corporate finance, students need to be able to understand the sources of revenue and types of financing available to corporations.  Issuing stocks and selling bonds are two ways that corporations finance themselves and invest in each other.

Purpose: The purpose for this project is to understand how stocks and bonds are traded in the open market.

Requirements:  Select three common stocks and three corporate bonds.  Write a one to two page paper (not including graphs that are copied and pasted into section 2 and your citations) addressing each of the following categories Each category should be labeled in your paper..

1. Stocks and Bonds - Description of all six securities including why you included them.  Be sure to include the stocks’ current price, daily change and the bond’s yield to maturity and bond ratings.  
2. Graphs - Charts showing each stock’s activity for the last 52 weeks as compared to the S&P 500.
3. Trends - Discussion on how current market and economic trends have affected each security.
4. Citations - Citations in MLA format.

Answer 1

1. The three common stocks are

a)Growth stocks. These are the shares you buy for capital growth, rather than dividends.

b) Defensive stocks.

c) Divident yield stocks

Corporate bonds are considered to have a higher risk than government bonds, which is why interest rates are almost always higher on corporate bonds, even for companies with top-flight credit quality.

3 corporate bonds are

There are different types of bonds which are as follows

a)Treasury Securities. Bonds, bills, and notes issued by the U.S. government are generally called “Treasuries” and are the highest-quality securities available. ...

b) Municipal Bonds. ...

c) Corporate Bonds. ...

d) Zero-Coupon Bonds.

A security is a financial investment with some monetary value. It entitles the holder to ownership of a part of a publicly traded company, such as a stock, or a debt obligation, such as a bond. Securities are listed on the stock exchanged and can be bought, sold, or traded on the secondary market.

Four major categories of securities are: Cash, bonds, stocks and mutual funds: 1) Cash: Cash is your regular money.

Stocks and bonds represent two different ways for an entity to raise money to fund or expand their operations. When a company issues stock, it is selling a piece of itself in exchange for cash. When an entity issues a bond, it is issuing debt with the agreement to pay interest for the use of the money.

Stocks are simply shares of individual companies. Here’s how it works: Say a company has made it through its start-up phase and has become successful. The owners wish to expand, but they're unable to do so solely through the income they earn through their operations. As a result, they can turn to the financial markets for additional financing.

onds, on the other hand, represent debt. A government, corporation, or other entity that needs to raise cash will borrow money in the public market and subsequently pay interest on that loan to investors. Each bond has a certain par value (say, $1,000) and pays a coupon to investors. For instance, a $1000 bond with a 4% coupon would pay $20 to the investor twice a year ($40 annually) until it matures. Upon maturity, the investor is returned the full amount of their original principal, except for the rare occasion when a bond defaults (i.e., the issuer is unable to make the payment)