Vanilla Bonds and Vanilla Stocks

First Part 400 words. Understanding the differences between the stock market and the bond market is essential to managing corporations and investing. In your discussion, answer the following questions:

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  • Describe the products and the functionality of the stock market.
  • Describe the products and the functionality of the bond market.
  • Describe how an individual company can use the stock market to generate initial funding as well as subsequent funding.
  • Describe how an individual company can use the bond market to generate funding.
  • Describe which is more expensive for a company to generate funds—the stock market or the bond market.

Second Part 800 words

Understanding how to properly value a vanilla bond (a plain bond) is essential for finance. Using the following Web site, find 3 different funding structures. Describe for each structure: security type, term, and yield. Furthermore, take a look at each of their offering documents, and provide a short description of the information found in the documentation.

  • Why do the different types of bonds get different rates? Explain your answer.
  • What makes each of the different structures different? Explain your answer.
  • What does the rate given say about the credit rating for each issuer? Explain your answer.
  • How does credit rating affect the rate given to the issuer? Explain your answer.
  • Which structure has the best credit rating based on the yield given to each structure? Explain your answer.
  • What is the credit rating supposed to tell you? Explain your answer.
  • Which bond is receiving the best price? Explain your answer.
  • Why does having a good credit rating matter to the issuer? Explain your answer.