Stocks
1. a share of ownership in the company; also known as equity
2. may get dividends from the company in a regular basis
3. cost may fluctuate depending on the company's current and future performance. reflects the fair value of ownership at a specific point
Dividends
sum of money paid by the company to its shareholders at regular intervals for maintaining ownership in the company. it is a share of company's profits, and varies each period depending on the company's performance
Company's perspective on stocks
Customer's perspective on stocks
Bonds
1. another way for a company to raise capital
2. Face value, coupon, yield
3. has a maturity date
4. inverse relationship to bond price
Face value
guaranteed value of the bond; $1000 to buy bond should get $1000 back when the bond matures
Coupon
Percentage of bond face value that is regularly paid to the bond holders. Essentially an interest rate.
Yield
1. Amount of return realized by the investor on the bond
2. the amount of money earned by the investor selling it
Company perspective on bonds
the cost of capital raised through bond issuance includes face value of the bond, price at which the bond is sold, the dividend/coupons on the bond