CHAPTER 10
Bonds and Stocks: Characteristics and Valuations
Chapter Learning Objectives...
AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO DO THE FOLLOWING:
- Identify the major sources of external long-term financing for corporations.
- Describe major characteristics of corporate bonds.
- Identify the reasons why investors seek stocks for an investment vehicle.
- Describe major characteristics of preferred stock and common stock.
- Describe the process for issuing dividends by a firm.
- Explain how financial securities are valued in general and specifically for bonds and stocks.
Where We Have Been...
The financial system is composed of a number of participants, such as banks, insurance companies, credit unions, and individuals, among others. Some borrow or lend funds; others seek to sell or purchase ownership rights, or common stock, in firms. We've seen how investors are willing to give up their money in the expectation of receiving a return that will exceed the inflation rate and will reward them for the risk of their investment. Time-value-of-money principles (present value, future value) help borrowers and lenders determine items such as how much to borrow, repayment schedules, and ...
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