EQUITY FINANCING Securities: S TOCKS & S HARES EQUITY FINANCING Shares (GB) = Stocks (USA) Flotation (GB) = IPO (USA) Nominal/Face/Par value <> Market value Stock exchange <> over-the-counter markets Primary markets, Secondary markets Rights issue, Bonus issue To quote/list (a company) To underwrite (an issue)

DEBT FINANCING ( = S ECURITIES (part II): B ONDS (U16) DEBT FINANCING ( = loans) Risk rating: AAA (best) to C (worst) Companies: DEBENTURE an interest paying loan which can be traded on bond markets securities, papers Governments: LONG TERM: GILTS – GB TREASURY BONDS-USA German BUND – EU SHORT TERM: TREASURY BILLS (3-MONTH) Raising money:

1c Vocabulary 1 investorsH providers of funds 2 issuing bondsB borrowing money 3 principalA the amount of a loan 4 maturityC date when money will be returned 5 pension fundsI retirement money 6 buy-and-hold i.E keep bonds till maturity 7 non-paymentF default 8 price appreciation D fall in interest rates 9 price depreciation J rise in interest rates 10 capital gainsG profits on the sale of assets

Listening Highlights (1b) 1.… bonds are obligations that are issued by companies and governments, i.e. they are ___________ to pay investors. 2.Stocks, on the other hand, have an uncertain future pay-off, depending on a company’s _________. Moreover, they have no final __________ _________. 3.…investors like to hold a diversified ________ of investments… 4.If interest rates were to increase the bond you bought yesterday is worth slightly _________. 5.If interest rates fall the value of the bond ______.

Listening Highlights (1b) 1.… bonds are obligations that are issued by companies and governments, i.e. they are promises to pay investors. 2.Stocks, on the other hand, have an uncertain future pay-off, depending on a company’s performance. Moreover, they have no final maturity date. 3.…investors like to hold a diversified portfolio of investments… 4.If interest rates were to increase the bond you bought yesterday is worth slightly less. 5.If interest rates fall the value of the bond increases.

Listening Highlights (2d) 1.Floating rate notes became popular as interest rates were _____________. 2.LIBOR stands for ____________________ 3.Convertible bonds have a feature that permits the holder to redeem them for _______. 4.Junk bonds are a popular name for ______ yield securities. 5.They are issued by companies that are seen to have a very high risk of __________.

Listening Highlights (2d) 1.Floating rate notes became popular as interest rates were deregulated. 2.LIBOR stands for London Inter-Bank Offered Rate. 3.Convertible bonds have a feature that permits the holder to redeem them for equity or stock. 4.Junk bonds are a popular name for high yield securities. 5.They are issued by companies that are seen to have a very high risk of default.

BONDS (U16) (cont.) Securities: – stocks – bonds – money market instruments: (derivatives, futures, options) Markets: - stock market (bourse) - bond market - money market - foreign exchange (forex /currency) market

The general term _______ refers to ________ ( or ______ or ______) + ______ + _________ _________ (futures, options and derivatives).

The general term securities refers to equities (or shares or stocks) + bonds + money market instruments (futures, options and derivatives).

FUTURES & DERIVATIVES (U17) HEDGING ≠ SPECULATING FUTURES OPTIONS DERIVATIVES