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Equity Securities, Tax and Estate Planning- Assignment

   

Added on  2020-03-23

10 Pages2212 Words74 Views
Running head: EQUITY SECURITIES/TAX AND ESTATE PLANNINGEquity securities/tax and estate planningName of the studentName of the universityAuthor note

1EQUITY SECURITIES/TAX AND ESTATE PLANNINGTable of ContentsQuestion 1..................................................................................................................................2Question 2..................................................................................................................................4Question 3..................................................................................................................................5Question 4..................................................................................................................................7Reference....................................................................................................................................9

2EQUITY SECURITIES/TAX AND ESTATE PLANNINGQuestion 1Bond Bond is also known as the security for fixed income and it is a debt instrument that iscreated for raising the capital. The bonds are generally regarded as the loan agreement amongthe investor and the issuer of bond where the issuer is obliged to pay certain specific amountat a specific date in future. When the investor purchases the bond he is loaning the amount tothe issuer who generally raises the amount for any project.Most common risk associated with the bond is the risk of interest rate that is the riskthat the prices of the bond will fall with the rise in the rates of interest. Through purchase ofthe bond, the bondholder commits to receive the fixed rate of return for the fixed term period.Various other risks associated with the bonds are the default risk, call risk, re-investment riskand inflation risk. Further, the coupon rate is affected if the interest rate in the marketchanged.Possible recurring incomes from bonds are from 2 ways – interest payment that isknown as the coupon over the lifetime of bond and from price fluctuation that depends onfactors like interest rate (Bodie, 2013).Common stockCommon stock is the securities that are represented by the equity ownership in anycompany, firm or organization. Common stock provides voting rights and enables the holderto get a share in the profit of the company through capital appreciation and dividend.However, in case of liquidation the common stock holder gets their right on the asset onlyafter the preferred stockholders, debt holders and various other debt holders.

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