CHAPTER 6-INTO BOND AND SHARE ESSAY- FOCUS WHY PEOPLE WANT TO INVEST IN BOND (25 MARKS) ELEMENTARY OF FINANCE CHAPTER SIX INTRODUCTION TO SHARES AND BOND INTRODUCTION . Corporation and govemments need to raise money from time to time for various reasons . In the long term, corporations need funds to expand and become more profitable and perhaps become the leaders of their respective industries On the other hand, government needs money to build infrastructures such as road, dams, school, hospital and the like to benefit the people and make country more prosperous the long run The amount of money needed for all these activities are monumental and financing aspects is long term in nature. There are two ways to get the financing which are issue bond or share, instead used loan. BOND Bond is a long-term promissory note that issuer borrows money and in retum agrees to pay a fixed amount of interest over specified period of time and pay back the principal amount when the bond matures. Bondholder is an investor that invests in the bond It is a debt instrument issued by borrowers to investors Borrower refers to corporation that need fund/money. Sometimes, borrower can be called issuer ELEMENTARY OF FINANCE Par value Principal to be paid by borrower upon maturity of the bond Par value of the bond usually RM1,000 Maturity period Number of years before the bond matured. Issuers are committed to meet their obligations over this period. Coupon rate The interest rate that the issuers pay to the bondholders. This rate is fixed which can be paid either annual or seme-annual basis Coupon payment is quoted as % of par value . Vield to maturity Rate of return eamed on a bond held until maturity SHARE Two types of share Common share A Preferred share COMMON SHARE It is a security that represents the ownership of the company (corporation); . The corporation will issued the share when need to raise the capital or expand the business There are two types of share namely common share and preferred share. Characteristics of common share . During bankruptcy, common shareholders are the last (aher honderdorferred shareholders) for claims on assets. C CHAPTER 6-INTO BOND AND SHARE ESSAY- FOCUS WHY PEOPLE WANT TO INVEST IN BOND (25 MARKS) ELEMENTARY OF FINANCE CHAPTER SIX INTRODUCTION TO SHARES AND BOND INTRODUCTION . Corporation and govemments need to raise money from time to time for various reasons . In the long term, corporations need funds to expand and become more profitable and perhaps become the leaders of their respective industries On the other hand, government needs money to build infrastructures such as road, dams, school, hospital and the like to benefit the people and make country more prosperous the long run The amount of money needed for all these activities are monumental and financing aspects is long term in nature. There are two ways to get the financing which are issue bond or share, instead used loan. BOND Bond is a long-term promissory note that issuer borrows money and in retum agrees to pay a fixed amount of interest over specified period of time and pay back the principal amount when the bond matures. Bondholder is an investor that invests in the bond It is a debt instrument issued by borrowers to investors Borrower refers to corporation that need fund/money. Sometimes, borrower can be called issuer ELEMENTARY OF FINANCE Par value Principal to be paid by borrower upon maturity of the bond Par value of the bond usually RM1,000 Maturity period Number of years before the bond matured. Issuers are committed to meet their obligations over this period. Coupon rate The interest rate that the issuers pay to the bondholders. This rate is fixed which can be paid either annual or seme-annual basis Coupon payment is quoted as % of par value . Vield to maturity Rate of return eamed on a bond held until maturity SHARE Two types of share Common share A Preferred share COMMON SHARE It is a security that represents the ownership of the company (corporation); . The corporation will issued the share when need to raise the capital or expand the business There are two types of share namely common share and preferred share. Characteristics of common share . During bankruptcy, common shareholders are the last (aher honderdorferred shareholders) for claims on assets. C
