STOCKS AND BONDS

OBJECTIVES:

1. Illustrate stocks and bonds

2. Distinguish between stocks and bonds
3. Describe the different markets for stocks
and bonds
4. Analyze the different markets for stocks
and bonds
5. Interpret the theory of efficient markets
 Definition of Terms:
Commission – a payment to an agent or
sales person based on the value or quantity
of goods bought and sold; broker’s or
brokerage fee. A commission is found by
finding the percentage of a sale.

Loan – is an arrangement in which a lender

gives money (principal) to a borrower in
exchange for the future repayment of the
principal along with interest or other finance
charges.
 Definition of Terms:
Stock Certificate- a paper issued to a
shareholder which shows on its face the
number of shares it represents.
Shareholder or Stockholder – one who owns
shares of corporation stock.
Dividend– earnings distributed to
shareholders of a corporation.
Certificate Number- an accession number or
placeholder to keep track of the number of
certificates.
 Definition of Terms:
Par Value – the face value of a bond or
stock.
No-par Stock – stock issued without a stated
value on the certificate
Market Price – the price at which a stock on
bond is sold.
Preferred Stock – type of stock for which
stockholders get first choice in distributed
profits.
Yield- rate of income on bonds
 Definition of Terms:
Common Stock- the ordinary stock of a
corporation, paying no specific rate or
amount of dividend.
Initial Public Offering (IPO) – stock sold
before it is available on a stock exchange.
Bond – a form of long-term promissory note
issued by a corporation or government in
exchange for a sum of money.
Bond holder – one who holds a corporation or
government bond.
 Consider the following when you want to
invest on stocks:
1. Be a smart investor
The efficient market theory states that the
stock market reacts very fast to any information
and at any given period, the market contains the
total views of all the investors in the market.
A stock index or stock index market is the
measure of the value of a section of the stock
market and is computed from the price of selected
stocks.
2. Decide whether you will need a full-service
broker, a discount broker, or online brokerage.
 Formulas:

Total Cost of Stock=Market Price + Commission

Rate of Income =

Net Proceeds=Market Price – Expenses

Interest = Par value x Rate x Time

LOGIC
 Definition of Terms:
Proposition- a declarative sentence that can
be classidied as true or false, but not both.
Simple proposition – a proposition that
conveys one thought with no connecting
words.
Compound proposition– contains two or more
simple propositions that are put together
using connective words.
Conjunction- two simple propositions
connected using the word and.
 Definition of Terms:
Disjunction- two simple propositions that are
connected using the word or.
Conditional – two simple propositions that are
connected using the words if….then.
Biconditional– conjuction of two conditional
statements where the antecedent and
consequent of the first statement have been
switched in the second statement.
Negation- the negation of a given statement
is a statement that is false whenever the
given statement is true, and true whenever
the given statement is false.
Symbols- are used to simplify work in logic

Connective Symbol Type

and ˄ conjunction
or ˅ disjunction
not ~ negation
if…then conditional
if and only if (iff) biconditional