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Series 6 (Unit 1 (Security: investment of $, in a common enterprise, with…

- - - - Rights, Warrants, and options:**Instruments used to get access of it
    - - Convertible Bonds:offer a lower coupon in exchange for the conversion feature, therefore is not a good choice for maximizing income.
      - Duration is often used to assess the sensitivity of a bond in response to interest rate changes—the greater the duration, the greater the sensitivity, and thus greater interest rate risk in an environment of changing interest rates. Duration is a measure of the amount of time a bond will take to pay for itself. Each interest payment is taken to be part of a discounted cash flow, so there is more to the calculation than simply adding up the interest payments. The 4% coupon has a longer duration than the 6% coupon. ($40 of interest per year versus $60 of interest per year means the 4% coupon will take more time for the bond to pay for itself.) Long term bond prices are more volatile than short term bond prices; therefore, the 20 year bond with the lower coupon represents the greatest risk when interest rates rise.
      - Interest Rates Affect Bonds When interest rates decrease, investors with maturing bonds will have to accept lesser yields to replace their investments. This is often referred to as a form of reinvestment risk.
  - - - Assets - Liabilities = net worth
      - total capitalization= net worth + long-term debt (liabilities)
        
        2 types of Equity: Common and Preferred Stock