bonds stocks

5

Bond

debt issed by a corporation or government body

Par value, face value

the initial princinple the borrower has to repay within the maturity

coupon payments

interest payments on a bond

common elements of bonds

represent borrowed funds

contractual agreements between lender and borrower

senior claims on assets and cash flows

no voting rights

par value

bond ratings increase marketability

interest and maturity are usually fixed

covenants (restrictions)

zero coupon bonds

pay no interest ovet the lifetime of a bond

stocks

legal representation of ownership on a corporation

elements of stocks

represent ownership claims

board of directors oversee the firm on behalf of the shareholders

board members voting rights allowed by corporate charter

par value is meaningless

lowest claims on assets

dividends only if the company declairs them

maturity never