Monday, April 10, 2017

Bonds v. Stocks

March 22, 2017
Bonds v. Stocks
  • Bonds are loans or “IOU’s” that represent debt that the government or a corporation must repay to an investor. The bondholder has no ownership of the company
  • If a corporation issues and then sells a bond, it is a liability for corporation but asset for the buyer
** if nominal interest rate falls, value of the bond increases (inverse relationship)**

Stocks
Stockowners can earn a profit in 2 ways:
  1. Dividends- portion of a corporation's profits are paid out to stockholders
    1. the higher the corporate profit, the higher the dividend
  2. Capital gain-  earned when stockholder sells stock for more than he or she paid for it. stockholder that sells stock at a lower price than the purchase price suffers a capital loss

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