Sunitha (1)
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Transcript of Sunitha (1)
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A Debenture
is a long-term Debt Instrument issued by governments and big institutionsfor the purpose of raising funds. The Debenture has some similarities
with Bonds but the terms and conditions of securitization of Debentures
are different from that of a Bond. A Debenture is regarded as an
unsecured investment because there are no pledges (guarantee) or liens
available on particular assets. Nonetheless, a Debenture is backed by all
the assets which have not been pledged otherwise.
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E.g., Types of bonds : U.S. government securities,
municipal bonds, corporate bonds, mortgage and
asset-backed securities, federal agency securities and
foreign government bonds.
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Bonds:
When the government wants to raise money, they canissue bonds and borrow money from the people. When
corporations want to raise large amounts of capital (issue
money), they can issue stocks or bonds. If they issue
bonds they borrow money from investors, like government
entities do. If they issue stocks they sell shares of
ownership in their company, common stock.
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In either case, once the bonds or
stocks are sold to the public, the
government or corporation gets its
money and has an obligation to
whoever owns the bonds or stocks itissued.After this the stocks or bonds
are securities that trade in the open
market. Stocks trade in the stock
market and bonds trade in the bond
market. How simple can you get?
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So, when you or I buy stocks or bonds, we are
simply buying them in the market through a
broker who charges us a commission for his
services. The government or corporation
already got their money. We are simply buyingbonds or shares of stock a previous owner told
his broker to sell. When we want to sell we
simply do it through our broker as well. That's
why having a stock market and a bond market
is so important.
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Shares:
All business enterprises need funds to meet their short term and long term business goals. Such
capital (big amounts) can only be raised when
large number of investors are available and
interested to invest in business. Institutions like
BSE (Stock Exchange) give a common platform
to a ³Business Man´ and an ³Investor´ where abusiness man can sell its stock and an investor
can but the same stock. Institutions like BSE give
the flexibility of buying and selling of stock as and
when required. Stock (shares) are nothing but
µownership of business broken-up into a largenumber of small units. Each unit of stock can be
easily bought and sold independently. And this
buying and selling of stock takes place in stock
exchanges like BSE and NSE.
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A derivative is a financial instrument - or more simply, an
agreement between two people or two parties - that has a
value determined by the price of something else (called theunderlying).[1] It is a financial contract with a value linked to
the expected future price movements of the asset it is
linked to - such as a share, or a currency. There are many
kinds of derivatives, with the most notable being swaps,
futures, and options.
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Referring to derivatives as stand-alone
assets would be a misconception,
since a derivative is incapable of
having value of its own. However,
some more commonplace derivatives,such as swaps, futures, and options,
(which have a theoretical face value
that can be calculated using formulas,
such as Black-Scholes), have been
traded on markets before their expiration date as if they were assets
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Dividends
A taxable payment declared by a company's board of
directors and given to its shareholders out of the
company's current or retained earnings, usually
quarterly. Dividends are usually given as cash (cash
dividend), but they can also take the for m of stock
(stock dividend) or other property. Dividends provide an
incentive to own stock in stable companies even if theyare not experiencing much growth. Companies are not
required to pay dividends. The companies that offer
dividends are most often companies that have progressed
beyond the growth phase, and no longer benefit
sufficiently by reinvesting their profits, so they usually
choose to pay them out to their shareholders. also called
payout
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Stock Markets:
In simple terms a stock market is a private or public
market for the trading of company stock and derivatives of
company stock at an agreed price; both of these aresecurities listed on a stock exchange as well as those
only traded privately.
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The expression 'stock market' refers to the system that
enables the trading of company stocks (collective shares),
other securities, and derivatives. Bonds are still traditionally
traded in an informal, over-the-counter market known as thebond market. Commodities are traded in commodities
markets, and derivatives are traded in a variety of markets
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Primary Markets:
Market in which buyers and sellers negotiate and transact
business directly, without any intermediary such as resellers.
Financial market in which newly issued securities are offered to
the public.
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Secondary market:
The market in which existing securities are tradedamong investors through an intermediary. Organized
exchanges such as the New York Stock Exchange
facilitate the trading of securities in the secondary
market.
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Secondary Market:
Market for buying and sellingsecurities of the listed companies.
Securities are traded after being
initially offered to the public in the
primary market and listed on the
stock exchange.
The stock exchanges are the
exclusive centers for trading of
securities.
It is a sensitive barometer and
reflects the trends in the economy
through fluctuations in the prices of various securities.
Listing on stock exchanges
enables the shareholders to
monitor the movement of the share
prices in an effective manner.
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Major stock exchanges of the world
HKSE ± Hong Kong stock exchange
AMEX ± American stock exchange SWX- Swiss exchange
SGX ± Singapore exchange
BSE ± Bombay stock exchange
FSE ± Frankfurt stock exchange
LSE ± London stock exchange
NASDAQ ± National association of securities
dealers automated quotation
J ASDAQ ± Japan association of securities
dealers automated quotation
KOSDAQ - Korean securities dealers
automated quotation MESDAQ- Malaysian exchange of securities
dealers automated quotation
NYSE ± New York stock exchange
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Stock Mar ket Index
A stock market index is a number that indicates relative level of
prices or value of securities in a market, on a particular day
The index also acts as a barometer for market behavior.
If the index value goes down, it means the market is bearish
(selling, therefore not optimistic of an upward trend) and if it
goes up then it is bullish (buying, in the expectation of a rise
based on positive news/performance).
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Major indices in Indian mar kets
Following are major indices of BSE
BSE SENSEX
MIDCAP
SMALLCAP
BSE-100BSE-500
Other Sectoral indices
Following are major indices of NSE
S&P
CNX NIFTYCNX NIFTY JUNIOR
CNX IT
BANK NIFTY
CNX 100
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Shares: Financial instrument signifying ownership of the
enterprise with specified rights &responsibilities, invariably
proportionate to the number of ³shares´ held.
Equity Shares: An equity share, commonly referred to as
ordinary share, represents the form of fractional ownership in a
business venture.
Preference shares: Owners of these kinds of shares are
entitled to a fixed dividend or dividend calculated at a fixed rate
to be paid regularly before dividend can be paid in respect of
equity share. They also enjoy priority over the equity
shareholders in payment of surplus. But in the event of
liquidation, their claims rank below the claims of the company¶screditors, bondholders/debenture holders.
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Bonds: A bond or a debt security is generally issued
by a company, municipality or government agency. A
bond investor lends money to the issuer and in
exchange, the issuer promises to repay the loan
amount on a specified maturity date. The issuer usually pays the bond holder periodic interest
payments over the life of the loan.
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