MGMT 1B Lecture Notes - Lecture 2: Accrued Interest, Equity Method, Income Statement
Document Summary
Securities: financial investments such as stock, bonds, commercial papers, etc. Marketable securities: securities that can be bought or sold in an open exchange such as nasdaq; recorded as an asset. Debt securities: bonds; debt on the sellers/ issuers books. Equity securities: stock; equity on the sellers/ issuers books. Debt and equity securities are the most common. Available for sale: unsure of when the bond/ stock will be sold. Interest is usually paid semi annually aas in every 6 months but it accrues daily. If the prevailing market rate is the same rate as face value, the bond is issued on par. Face value will be paid regardless of premium or discount. Have to use face rate to calculate the semi annual interest. When interest rates go up, bond prices go down. When interest rates go down, bond prices go up. We buy bond with a 12% face rate (or par rate or coupon rate)
