10 Pages

Rotman Commerce
Course Code
John Oesch

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Chapter 19: Securities & Investments Securities: Stocks and bonds, which represent a secured asset based claim on the part of investors, which are bought and sold. Stockholders have claims on the company assets, while bondholders just have a financial claim. Primary Market (salepurchase of newly issued stocks from firms or the govt) o Also called private placements o Need help from Investment Bankers to issue bonds, such as RBC Dominion Securities Secondary Market (salepurchase of previously issued stocksbonds) Investment Bankers (specialists who advise the company on the timingfinancial terms for the new issue, underwrite(buying) the new securities, create the distribution network that moves the new securities through groups of other banks and brokers into the hands of individuals. Common Stocks Market Value current price of a share the secondary securities market; the real value Buy Low, Sell High capital gain Book Value the value that shows up on YOUR booksthe actual price, not market = total stockholders equity divided by the number of shares of stocks (outstanding) Par Value the arbitrary value of a stock set by the board of directors and stated on stock certificates used by accountants but not investors Market Capitalization the dollar valuemarket value of stocks listed on a stock exchange (number of company shares outstanding x the value of each share) Callable Shares when the firm can buy back the preferred shares for a call price EX. Share Purchase: In 2008, Smyth buys a share for $10, and one year later it is worth $10.75. Just before he sells his share, the company pays out a dividend of 0.50 per share. His total holding return is 12.5% because: Capital Gain Yield = 7.5% Dividend Yield = 5% Initial Public Offering (IPO) Find the investment banking side of a large company talk to the stock market, arrange a date, and offer the initial stock offering at a certain Date. E.g. 2006, Tim Hortons).
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