1. What are the key differences between common stock, preferred stock, and corpo
ID: 2780678 • Letter: 1
Question
1. What are the key differences between common stock, preferred stock, and corporate bonds? 2. What are the major components of the money market? How to money market debt securities differ from long term bonds? 4. What is meant by limited liability? 5. What is a repurchase agreement? 6. What are the differences between Primary markets and Secondary markets. 7. List all debt securities. 8. List all equity securities 9. What are the types of corporate bonds? 10. What are asset classes? Name the asset classes you know. 11. What are options? 12. What is the major difference between options and futures? 13. What is a swap? 14. How would classify Foreign exchange? In which markets are they traded? 15. Explain Euro-currencies? 16. Name types of international bonds? 17. What are Global Depositary receipts? 18. What is LIBOR?Explanation / Answer
Answer to Question No 1
Common stock represents ownership in the company and entitles the owner to dividends declared by a company and the right to sell shares of the company. Hence the reward to a common stock holder is the dividends and the capital gains made on selling the share
Preference share is also a type of ownership of the company but comes second to the common stock in terms of rights of ownership. It however gets first preference in terms of receiving dividends as compared to common stock holders. Also the rate of dividend on preference stocks is fixed. It therefore comes somewhere between common stock and debt.
Corporate bonds are however a form of debt and entitles the holder to periodic payments of interest depending on the terms of the bond issue. Interest on bonds is to be paid before any dividend is paid.
Answer 2
Money market components include:
Answer 3
Money market securities are far more liquid than debt market securities and will have a maturity of maximum one year. That is why the yields are lower although the liquidity will be higher
Answer 4
Limited Liability implies that one's liability in the event of bankruptcy of a company is limited to only the share purchased by the buyer in the company and personal and other assets owned by the buyer cannot be attached to recover the companies losses
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