An overview of the financial system - Financial Markets - Debt & equity markets
3 important questions on An overview of the financial system - Financial Markets - Debt & equity markets
What is an issuance of a debt instrument?
A contractual agreement (bond or mortgage) by the borrower to pay the holder of instrument a fixed amount at regular intervals.
Why are equities considered as long-term securities?
Because they have no maturity date.
What is the advantage and disadvantage of an equity?
- the firm must pay back all debt holders before it can repay its equity holders (equity holder= residual claimant)
+ equity holders benefit from any increase in the firm's profitability or asset value.
+ equity holders benefit from any increase in the firm's profitability or asset value.
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