Stocks & Bonds

• Bonds are loans
• Stocks you own 
• Bonds: are loans, or IOUs, that represent debt that the government or a corporation must repay to an investor. The bondholder has no ownership of the company 

Bonds 

• First: if a corporation issues and then sell a bond its a 
• Liability for the corporation 
• Asset for the buyers 
• If that corporation issues a 10k bond with a 10 yr. term and a 5% interest………..
• Nominal interest rate at the time of issue = 5%
• Increases if the nominal interest rate falls to 3%
• Decreases if the nominal interest rate rises to 8%

Stocks 

• Stockowners can earn a profit in two ways
• Dividends, which are portions of a corporation’s profits, are paid out to stockholders 
• the higher the corporation profit, the higher the dividends 
• A capital gain is earned when a stockholder sells stock for more than he or she paid for it 
• A stockholder that sells stock at a lower price that the purchase price suffers a capital loss