BUS 355 - Financial Management

The issuer pays interest on the bond at specified intervals and then repays the amount borrowed, or principal, on a specified maturity date. While there are a wide variety of bonds issued in the global marketplace, the two most common are corporate bonds and government bonds. Corporate bonds are issued by private companies and are generally fully taxable and secured by a combination of revenues and assets. Government-issued bonds are used to finance public infrastructure, defense, and the full spectrum of government spending. Bonds issued by the United States government are backed by the full faith and credit of nation. State and local municipalities issue municipal bonds to finance smaller projects of local interest. The interest income on municipal bonds is tax free.

They are thus debt instruments and are issued for a certain value (par value), for a set period of time (ending at their maturity date), at a given interest rate, and generally with some other provisions, such as whether the bonds can be “called early” (paid off prior to their maturity date). The interest paid on bonds represents their cost to the borrower/seller. This cost is affected by the bond purchaser’s confidence that the interest payments and principal can be covered by the issuer. The less confidence the market has in a particular issuer, the more interest the issuer will need to offer to convince investors to bear the risk of purchasing its bonds.

As the global economy continues to develop and integrate, leaders and analysts consistently look to interest rates as both a vital indicator of that system's health and a useful vehicle by which it may be controlled. The paper provides a summary of interest's historical development, its current characteristics, and its impact on economic systems.

The term "mutual fund" can refer to both the investment itself and the companies that create and manage mutual funds. Since their introduction into the US economy in the 1920s, mutual funds have become a huge part of the United States’ financial-services sector.

All investors large and small engage in some type of portfolio management. Portfolio management is how an investor decides what to do with the collection of investments under the investor's control. The management of an investment portfolio is driven by the skill and knowledge of the investor, the opportunities available to that investor, the goals of the investor and the investor's response to economic activity and investment performance. There are a number of strategies an investor may use to manage a portfolio and a number of tasks to maximize portfolio management. All of this starts with goals and continues with investor education. Although many portfolio managers and investment advisors are available, the individual investor must exert control over how investments are managed. Adjustments to a portfolio may take place because of changing objectives or may depend on where the investor is in his or her life cycle. Risk also determines what moves an investor will make. Often, investors close to retirement will look to build portfolios and limit risk.

They analyze and assess financial trends, market conditions, and company histories to determine the most profitable potential investments for their clients. Securities Sales Agents buy, sell, and transfer stocks and bonds (types of securities) based on the financial needs of their customers. When a Securities Sales Agent successfully completes a financial transaction, he or she receives a commission. Securities Sales Agents are responsible for finding and retaining clientele and cultivating strong connections within the financial world.

As a corporation's perceived value shifts, the value of a corporation's shares can drastically change. Many stock exchanges also trade in bonds, funds, and other forms of investments. Stock exchanges are closely related to the stock market. The stock market is the entire market of shares that are available for trading. When most people trade on the stock market, they aim to buy a certain stock, hold onto it until it increases in value, and then sell it for more than they paid for it. Many people invest their long-term savings in the stock market in hopes that it will grow faster than if they simply allowed the money to accrue interest in a savings account.

They fall into the category of equity instruments, which are financial instruments that represent ownership of something. In the case of stocks, each share of stock represents a share of ownership of a particular company. This ownership often conveys certain benefits, including access to up-to-date financial information through the company’s shareholder meetings and voting rights in regard to the company. Some stocks pay dividends, which are small amounts of money paid to shareholders for each share they possess. Although some privately held companies offer shares of stock to investors, the majority of stocks held or traded in the United States are of publicly held companies and are typically first made available to qualified investors through initial public offerings (IPOs). The bulk of stock-trading activity occurs on secondary markets such as the New York Stock Exchange, where investors purchase shares from each other rather than from the issuing company.