Bonds vs. Stocks

Bonds are loans

Stocks are owns

Bonds are loans, or IOU's, that represent debt that the government or corporation must repay to an investor. The bond holder has NO OWNERSHIP of the company.
Bonds

• First: if a corporation issues and then sells a bond
• If that corporation issues a 10K bond with a 10yr term and a 5% interest
• Interest rate: Decreases
• Bonds: Increases
• Interest Rates: Increases
• Bond: Decreases
• Nominal interest rate: 5%
• Stock owners can earn a profit in 2 ways
1. Dividends, which are portions of a corporations profits are paid to stockholders
2. A capital gain is earned when a stockholder sells stock for more than he or she paid for it.
3. A stock holder that sells stock at a lower price than the purchase price suffers a capital loss.