Discuss the advantages and disadvantages of bonds and shares

題目：

Discuss the advantages and disadvantages of bonds and shares investment to an investor.

解答：

Bonds:Making a loan to a corporation
Bonds - Advantages:
1.Fixed return on investments - "coupon rate".
2.Higher in the creditors' hierarchy as compared to shareholder,lower risk of investment.
3.Although bonds may not perform as well as stocks over any period in which major market downturns do not occur,they are useful tools in their ability to hedge against market fluctuations and the normal ups and downs of the economy.
Bonds - Disadvantages:
1.Do not share in the company's profits.
2.There is interest rate,inflation and credit risk.Credit risk is the risk that the bond issuer will be unable to make its payments on time or at all,effectively defaulting on the bonds.
Shares:Buying part ownership in a corporation
Shares - Advantages:
1.Gain ownership and control in a corporation.
2.Share in the company's profits in terms of dividend payout or capital gain.
3.If you have a long time before retirement,stocks appear to have substantial advantages because there is more time for the market to correct any downturn that may cause a decrease in value of the stock.
Disadvantages of shares:
1.Potential total loss because the shareholders are at the bottom of the creditors' hierarchy,higher risk for investment.
2.The profit gain is more subject to market fluctuations,and dividends are not guaranteed.Stocks can drop in value and become worthless.
差不多就是這些了.你是要考Financial management嗎,希望這個答案能幫到你.
再問： 謝謝啊，還有個問題 What is the goal of a firm? Discuss how is the goal can brings a firm towards a long term survival.
再答： Goal of a firm: maximization of shareholder's wealth. Discussion: Shareholder's wealth can be generated in terms of dividend payout and capital gain. Capital gain is reflected in share price. Potential future dividend payout is also reflected in the share price. Therefore, maximization of share price is a substitute goal of maximization of shareholder's wealth. Share price is the present value of future net cash inflows generated by the firm. It also reflected the market valuation of the long term prospects of the firm. Therefore, maximization of share price will brings a firm towards a long term survival. Some firm adopt profit maximization as the goal. But profit can be manipulated and is only reflective of the short term financial position. Profit maximization may lead to short sighted decisions at the expense of firm's long term success. Therefore, profit maximization along will not bring the firm towards long term survival.
再問： 還有些問題，麻煩你了謝謝。 Discuss the two major types of financial markets. Explain what is a central bank and its function in ensuring stability in an economy. Explain the important functions of financial intermediaries in the economy. By using examples, discuss any two (2) of banking intermediaries and non-banking intermediaries. Very thanks for you !
再答： 我說兄弟你太狠了點，這麼多題啊。我就總結要點吧。 1. Discuss the two major types of financial markets. a. Capital markets: - Source of longer-term finance, mainly via a stock exchange. - The major types of securities dealt on capital markets are as follows: • public sector and foreign stocks • company securities • Eurobonds - Include ordinary shares, long term debenture, preference share, etc. b. Money markets: - Source of short-term funds, transactions conducted by phone or telex. - It is not one single market but a number of closely-connected markets. - Include leasing, and short term funding such as trade credit and overdraft, etc. 2. Explain what is a central bank and its function in ensuring stability in an economy. The central bank has been described as "the lender of last resort", which means that it is responsible for providing its economy with funds when commercial banks cannot cover a supply shortage. In other words, the central bank prevents the country's banking system from failing. However, the primary goal of central banks is to provide their countries' currencies with price stability by controlling inflation. A central bank also acts as the regulatory authority of a country's monetary policy and is the sole provider and printer of notes and coins in circulation. A central bank can be said to have two main kinds of functions: (1) macroeconomic when regulating inflation and price stability and (2) microeconomic when functioning as a lender of last resort. 3. Explain the important functions of financial intermediaries in the economy. - Risk diversification (through portfolio investment) - Aggregation effect (increase cost efficiency through economies of scale) - Maturity transformation (to deal with liquidity problem by making use of the maturity gap) - Hedging - Forming a market - Providing expertise advice and third party financial consultation services 第四條寫不下去啦，回復有字數限制。你重新開個問題吧。
再問： By using examples, discuss any two (2) of banking intermediaries and non-banking intermediaries.
再答： Financial Intermediary: An institution that acts as the middleman between investors and firms raising funds. Often referred to as financial institutions. Bank as intermediaries: A bank acts as a middleman between suppliers of funds and users of funds, substituting its own credit judgment for that of the ultimate suppliers of funds. Collecting funds from three sources: checking accounts, savings, and time deposits; short-term borrowings from other banks; and equity capital. A bank earns money by reinvesting these funds in longer-term assets. Example: a. Commercial bank: invests funds gathered from depositors and other sources principally in loans. b. Investment bank: manages securities for clients and for its own trading account. Non-banking intermediaries: Non-banking Financial Institutions carry out financing activities but their resources are not directly obtained from the savers as debt. Instead, these Institutions mobilise the public savings for rendering other financial services including investment. All such Institutions are financial intermediaries and when they lend, they are known as Non-Banking Financial Intermediaries (NBFIs) or Investment Institutions. Examples: brokers, creditrating agencies, dealers, insurance companies, closed and open ended mutual funds, venture capitalists, and finance houses.
再問： 非常感謝！