Finance Formulas / July 19, 2018 / Luz Tyson
If a corporation has issued only one type, or class, of stock it will be common stock. ("Preferred stock" is discussed later.) While "common" sounds rather ordinary, it is the common stockholders who elect the board of directors, vote on whether to have a merger with another company, and get huge returns on their investment if the corporation becomes successful.
To examine the relationship between interest rates and bond prices, imagine an investor buys a bond from ABC Corporation with a 4% coupon rate and a $1,000 face value. Another investor waits a few weeks before buying a bond, and during that time, the issuer raises interest rates to 6%. At this point, the second investor can buy a $1,000 bond from ABC Corporation and receive $60 in interest per year.
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