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COMM101 Study Guide - Final Guide: Absolute Advantage, Switching Barriers, World Trade Organization


Department
Commerce
Course Code
COMM101
Professor
Gregory Overholt
Study Guide
Final

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Economic Factors
Bonds:
bonds – characteristics (return, term, priority over stockholders), types, features,
factors affecting price, calculating approximate yield to maturity, relationship between
prevailing interest rates and bond prices, reading bond quotations
-Represents debt for issuing corporation or government.
Characteristics:
-Legal,, binding agreements
-Fixed rate of return (often paid semi-annually)
-Priority over stockholders
Types;
-Secured vs unsecured (debentures)
-Registered vs bearer
Features: callable, serial, convertible.
Factors affecting price: (bond prices vary inversely with interest rates)
-Coupon rate and prevailing rates of interest (relationship)
-Changes in credit rating
-Economic / Market Risk
-Inflation
Relationship between prevailing interest rates and bond prices,
Paid at discount, premium, par.
Calculate yield to maturity

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oRelationship between prevailing interest rates and bond prices
oReading bond quotations
Stocks
Common stocks and preferred stocks – characteristics (return/dividends, term,
priority in bankruptcy situations, voting rights), features, factors affecting price,
reading stock quotations
-Represents equity/capital for issuing company

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Characteristics (4)
-Voting rights, no fixed term, variable return, discretionary payment (dividends),
Features (6):
Factor affecting prices (4):
Demand and supply of stock due to negative or positive perceptions/facts.
Primary factors
1. Earnings – above or below expectations, rumors
2. General market conditions – bull vs bear markets, economy, interest (especially
preferred)
3. Speculation – bought or sold on belief price will soon move
Price of a security is collective expression of all opinions of those who buying and
selling
Undervalued issue – offers higher return than stocks of similar risk
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