MGTA02H3 Lecture : Chapter 11-12 Bonds and Stocks
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Lender buys the bond, borrower promises to pay interest. So bonds usually sold by large borrowers: govts, utilities, banks. Investor (buyer) relies on general credit worthiness of issuer (seller) Most common form of shares: common shares . If business makes profit, and choses to, it will pay dividends. Some people have spare cash, they want to put it to use. Owning shares brings benefits: co-ownership of business, vote at annual meetings, share of the profits (dividends), increase in value (capital gain) The market for buying shares when first sold by corporations to shareholders. Investment banks help corporations: how many shares to sell, price of the shares, tim- ing of the sale, identify buyers. Advise entrepreneurs on timing, pricing and marketing of shares to investors. Collect, package and distribute funds from investors to companies. How: stock brokers sell shares to investors. When a shareholder sells shares to someone else.
