Comprehension

Ex.1 a) First insert the given words: shares (3), shareholders (2), bondholders (2), bonds (4).

b) Then speak about the main differences between bonds and shares.

1. … are a type of equity financing.

2. … have an equity stake in the company (i.e., thay are owners).

3. … have a creditor stake in the company (i.e., they are lenders)

4. … are a type of debt financing.

5. … usually have a defined term, or maturity, after which they are redeemed (are paid back).

6. … get dividends which depend on the company’s revenues.

7. … get fixed interest which is called a coupon

8. … have much greater potential to increase in value but they are also more subject to market fluctuations.

9. … are bought and traded mostly by institutions like central banks, sovereign wealth funds, pension funds, insurance companies and banks.

10. … are mostly bought at the stock exchange.

11. … are issued by governments when public spending exceeds receipts from income tax, VAT, and so on. (open market operations)

Text 2

FUTURES, OPTIONS AND SWAPS