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by: Emmanuel McDermott

IntroductionToBusiness BUS005

Marketplace > Solano Community College > Business > BUS005 > IntroductionToBusiness
Emmanuel McDermott
Solano Community College
GPA 3.83


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This 4 page Study Guide was uploaded by Emmanuel McDermott on Tuesday October 20, 2015. The Study Guide belongs to BUS005 at Solano Community College taught by PeterCain in Fall. Since its upload, it has received 40 views. For similar materials see /class/225402/bus005-solano-community-college in Business at Solano Community College.


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Date Created: 10/20/15
lquot BUS 005 STUDY GUIDE CHAPTER 19 Securities Markets Financing amp Investment Opportunities The Function of Securities Markets Initial Public Offering IPO p 512 7 The first public offering of a corporation s stock Investment bankers p 513 7 Specialists who assist in the issue and sale of new securities Institutional investors p 513 7 Large organizations 7 such as pension funds mutual funds insurance companies and banks that invest their own funds or the funds of others Debt Financing by Selling Bonds Bond p 513 7 A corporate certi cate indicating that a person has lent money to a firm Interest coupon rate on a bond p 513 7 The payment the issuer of the bond makes to the bondholders for use of the borrowed money Maturity date p 514 7 The exact date the issuer of a bond must pay the principal to the bondholder Type of Government securities that compete with corporate bonds for investors Figure 191 p 514 O 0 Bond Ratings Moody s and S amp P s see Figure 192 p 514 0 Advantages amp disadvantages of bonds pp 514 515 o Debenture bonds p 515 7 Bonds that are unsecured ie not backed by any collateral such as equipment 0 Sinking fund p 515 7 A reserve account in which the issuer of a bond periodically retires some part of the bond principal prior to maturity so that enough capital will be accumulated by the maturity date to pay off all of the bond Callable bond p515 7 permits the bond issuer to pay offthe bond s principal prior to its maturity date 0 Conveltible bond p 516 7 can be converted into shares of common stock III Equity Financing by Selling Stock Stocks p 516 Shares of ownership in a company 0 Stock ceItificate p 516 7 Evidence of stock ownership that specifies the name of the company the number of shares it represents and the type of stock being issued 0 Dividends p 516 7 Part of a firm s pro ts that may be distributed to stockholders as either cash or additional shares of stock 0 Advantages amp disadvantages of issuing stock pp 517 518 0 Preferred stock p 517 7 Stock that gives owners preference in payment of dividends and an earlier claim on assets than common stockholders ifthe company is forced out of business and its assets sold 0 Common stock p 518 7 The most basic form of ownership in a rm it confers voting rights and the right to share in a rm s pro ts through dividends if approved by the rm s board of directors IV Stock exchanges p 619 7 see Figure 204 p 618 lt NYSE New York Stock Exchange a publicly traded company called the NYSE Group largest national exchange floor trading amp electronic trading as of 1205 through Archipelago s electronic trading system AMEX 7 second largest national exchange floor trading amp electronic trading as of 307 Over the counter OTC market p 618 7 Exchange that provides means to trade stocks not listed on the national exchanges NASDAQ p 521 7 A nationwide electronic system that links dealers across the nation so that they can buy amp sell securities electronically rather than in person a telecommunications network Securities amp Exchange Commission SCE p 520 7 federal agency that has responsibility for regulating the various exchanges Prospectus p 619 7 condensed version of economic and nancial data that must be les with the SEC before issuing stock How to Invest in Securities Stockbroker p 522 7 a registered representative who works as a market intermediary to buy and sell securities for clients 0 Online brokers wwwschwabcom wwwtdameritradecom wwwameritradecom Five key criteria when selecting investment options p 525 Investment risk 7 chances an investment will be worth less over time NPV net present value Yield 7 expected rate of return Duration the length of time yout money is committed to an investment Liquidity 7 how quickly you can get back your investment funds Tax consequences 7 how the investment will affect your tax situation Elk59 VI Investing in Stocks Capital gains p 526 7 The positive difference between the purchase price of a stock and its sales price VII Stock splits p 527 7 An action by a company that gives shareholders two or more shares of stock for each one they own Mutual funds p 527 An organization that buys stocks and bonds and then sells shares in those securities to the public M orningstar Investor newsletter is an excellent resource for evaluating mutual funds as are Business Week magazine The Wall Street Journal Money magazine and Investor s Business Daily Index funds p 528 7 A fund that invests in a certain kind of stock the most recommended is an index fund that covers the whole stock market the best choice for young people 0 Diversi cation p 528 7 Invest in a variety of index funds Exchange traded funds p 528 7 Collections of stocks that are traded on exchanges but are traded more like individual stocks than like mutual funds can be traded throughout the entire trading day unlike mutual funds traded only at the end of a trading day See Dealing with Change box on p 529 for examples of such ETFs High risk investments Junk bonds p 530 Highrisk highinterest bonds Buying stock on margin p 530 7 purchasing stocks by borrowing some of the purchase cost from the brokerage rm Commodity exchange p 531 7 a securities exchange that specializes in the buying amp selling of precious metals and minerals e g silver foreign currencies gasoline and agricultural goods e g wheat cattle sugar Futures markets p 7 commodities markets that involve the purchase and sale of goods for delivery sometime in the future Comparing investments 7 see Figure 196 p 532 Understanding bond quotations see Figure 197 p 533 Understanding stock quotations see Figure 198 p 533 Understanding mutual funds quotations see Figure 199 p 534 The Dow Jones Industrial Average the Dow p 535 7 the average cost of 30 selected industrial stocks used to give an indication of the direction up or down of the stock market over time Program trading p 536 7 giving instructions to computers to automatically sell if the price of a stock dips to a certain point to avoid potential losses Rev 5409 pfc


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