Bonds and Stocks

5 important questions on Bonds and Stocks

What is a bond?

A loan to an organisation or the government

What is the face value of a bond?

The amount of money you lend to an organisation

What are the 3 types of bonds?

1. Level-coupon bond
2. Zero-coupon bond (pure discount bond)
3. Consol
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What happens to the price of a bond when the market interest rate increases?

They go down, as the new bonds issued with a higher coupon rate pay more coupons.

What is a cash cow?

When all earnings per share are paid out to shareholders and not any parts of the net income remains in the organisation.

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