Group members;

Janice R. Gestiada

Renz-ann E. Erandio

Sherilyn G. Totica

Mary Dee L. Espallardo

Julieta Rose G. Toriaga

BSBA 3B

INSTRUCTOR: LORENA POLO

STOCKS

- A stock is a general term used to describe the ownership certificates of any company. A share,
on the other hand, refers to the stock certificate of a particular company. Holding a particular
company's share makes you a shareholder. Description: Stocks are of two types—common and
preferred. A stock (also known as equity) is a security that represents the ownership of a
fraction of a corporation. This entitles the owner of the stock to a proportion of the
corporation's assets and profits equal to how much stock they own. Units of stock are called
"shares."
- Stock, also known as equity, represents ownership interests in corporations. Whether you own
one, 100 or 100 million shares of stock in a company, you're an owner of the company.

WORKS

Corporations sell stock, or ownership in the company, in return for cash to run their businesses. Much of
the time, only a few people (the founders of the company, for example, who have put their life savings
into the company) own the company. But when several owners want to cash out their investments or
the company needs more cash for whatever reason, the corporation might "go public," meaning that it
sells some of, all of or more of its shares to the general public via a stock exchange.

CLASSIFICATION OF STOCKS

Common stocks- common stock, by means of capital growth, yields higher returns than almost every
other investment. This higher return comes at a cost since common stocks entail the most risk. If a
company goes bankrupt and liquidates, the common shareholders will not receive money until the
creditors, bondholders, and preferred shareholders are paid.

Preferred Stocks- Preferred stock represents some degree of ownership in a company but usually
doesn't come with the same voting rights. (This may vary depending on the company.) With preferred
shares investors are usually guaranteed a fixed dividend forever. This is different than common stock,
which has variable dividends that are never guaranteed. Another advantage is that in the event of
liquidation preferred shareholders are paid off before the common shareholder (but still after debt
holders). Preferred stock may also be callable, meaning that the company has the option to purchase
the shares from shareholders at any time for any reason (usually for a premium).

Stock Values – stocks have par value, book value, net asset value and market value per share. Par value
is the nominal value assign to a share as appearing on the stock certificate.

Stockbroker is a professional trader who buys and sells shares on behalf of clients. The stockbroker may
also be known as a registered representative or an investment advisor. Most stockbrokers work for a
brokerage firm and handle transactions for a number of individual and institutional customers.

Stock dealer is one who buys and sells stocks for his own account and a financial professional who buys
and sells securities for their account. The term stock dealer doesn't describe just anyone buying and
selling securities — it only applies to those who do so as a part of their business. If they aren't buying
and selling as a part of a business, they are traders.

Stock market – is where a stocks are bought and sold that may be done by stocks exchange.

Stock exchange- an organization that facilitates the trading’s of stocks warrants and other securities
listed therein.

BONDS

- A fixed income instrument that represents a loan made by an investor to a borrower. Bonds are
used by companies, municipalities, states, and sovereign governments to finance projects and
operations. Owners of bonds are debtholders, or creditors, of the issuer. Examples of bonds
include treasuries (the safest bonds, but with a low interest - they are usually sold at auction),
treasury bills, treasury notes, savings bonds, agency bonds, municipal bonds, and corporate
bonds (which can be among the most risky, depending on the company).

THE 3 MAIN TYPES OF BONDS

Corporate bonds are debt securities issued by private and public corporations. Investment-grade. These
bonds have a higher credit rating, implying less credit risk, than high-yield corporate bonds.

High-yield. These bonds have a lower credit rating, implying higher credit risk, than investment-grade
bonds and, therefore, offer higher interest rates in return for the increased risk.

Municipal bonds, called “munis,” are debt securities issued by states, cities, counties and other
government entities.

Types of “munis” include:

General obligation bonds. These bonds are not secured by any assets; instead, they are backed by the
“full faith and credit” of the issuer, which has the power to tax residents to pay bondholders.

Revenue bonds. Instead of taxes, these bonds are backed by revenues from a specific project or source,
such as highway tolls or lease fees. Some revenue bonds are “non-recourse,” meaning that if the
revenue stream dries up, the bondholders do not have a claim on the underlying revenue source.
Conduit bonds. Governments sometimes issue municipal bonds on behalf of private entities such as non-
profit colleges or hospitals. These “conduit” borrowers typically agree to repay the issuer, who pays the
interest and principal on the bonds. If the conduit borrower fails to make a payment, the issuer usually is
not required to pay the bondholders.

OTHER TYPES OF BONDS

Following are the types of bonds:

1. Fixed Rate Bonds

In Fixed Rate Bonds, the interest remains fixed throughout the tenure of the bond. Owing to a constant
interest rate, fixed rate bonds are resistant to changes and fluctuations in the market.

2. Floating Rate Bonds

Floating rate bonds have a fluctuating interest rate (coupons) as per the current market reference rate.

3. Zero Interest Rate Bonds

Zero Interest Rate Bonds do not pay any regular interest to the investors. In such types of bonds, issuers
only pay the principal amount to the bond holders.

4. Inflation Linked Bonds

Bonds linked to inflation are called inflation linked bonds. The interest rate of Inflation linked bonds is
generally lower than fixed rate bonds.

5. Perpetual Bonds

Bonds with no maturity dates are called perpetual bonds. Holders of perpetual bonds enjoy interest
throughout.

6. Subordinated Bonds

Bonds which are given less priority as compared to other bonds of the company in cases of a close down
are called subordinated bonds. In cases of liquidation, subordinated bonds are given less importance as
compared to senior bonds which are paid first.

7. Bearer Bonds

Bearer Bonds do not carry the name of the bond holder and anyone who possesses the bond certificate
can claim the amount. If the bond certificate gets stolen or misplaced by the bond holder, anyone else
with the paper can claim the bond amount.

8. War Bonds

War Bonds are issued by any government to raise funds in cases of war.

9. Serial Bonds

Bonds maturing over a period of time in installments are called serial bonds.

10. Climate Bonds

Climate Bonds are issued by any government to raise funds when the country concerned faces any
adverse changes in climatic conditions.

CHARACTERISTICS OF BONDS

 Face value is the money amount the bond will be worth at maturity; it is also the reference
amount the bond issuer uses when calculating interest payments. For example, say an investor
purchases a bond at a premium $1,090 and another investor buys the same bond later when it is
trading at a discount for $980. When the bond matures, both investors will receive the $1,000
face value of the bond.

 The coupon rate is the rate of interest the bond issuer will pay on the face value of the bond,
expressed as a percentage. For example, a 5% coupon rate means that bondholders will receive
5% x $1000 face value = $50 every year.

 Coupon dates are the dates on which the bond issuer will make interest payments. Payments
can be made in any interval, but the standard is semiannual payments.

 The maturity date is the date on which the bond will mature and the bond issuer will pay the
bondholder the face value of the bond.

 The issue price is the price at which the bond issuer originally sells the bonds.

The Issuers of Bonds

Governments (at all levels) and corporations commonly use bonds in order to borrow money.
Governments need to fund roads, schools, dams or other infrastructure. The sudden expense of war
may also demand the need to raise funds.

What are the benefits of stock and bonds?

Stocks offer an opportunity for higher long-term returns compared with bonds but come with greater
risk. Bonds are generally more stable than stocks but have provided lower long-term returns. By owning
a mix of different investments, you're diversifying your portfolio.

What is the difference between a stock and a bond?

When a company raises capital by issuing stock, it entitles the holder a share of ownership in the
company. By contrast, when a company raises funds for the business by selling bonds, these bonds
represent loans from the bondholder to the company. Bonds have terms that require the company or
entity to pay back the principal along with interest rates in exchange for this loan. In addition,
bondholders are granted priority over stockholders in the event of a bankruptcy, while stockholders
typically fall last in line in claim to assets.

Why stocks and bonds are important?

Stocks are beneficial for investors who have a higher risk appetite. However, in return for the risk,
stockholders have a greater potential return. Bonds are more beneficial for investors who want less
exposure to risk but still want to receive a return.