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Describing graphs in a paragraph, cont. • HW check: RB 37 quite similar. 1) The number of inhabitants ... is ____________ decreased / declined 2) Both countries’ exports ___________________. 3) In both countries, the number of people out of work increased/soared _____________, in Croatia this was by approximately 13% ___________________. plummeted 4) The GDP in both countries _______________, in Finland __________, in Croatia __________. by 13 % by 6.9 % contracted further this year. 5) Croatia’s GDP ________________ cut 12% 6) Personal income tax was _______ by ________ the 14% corporate tax rate was ________ in F. slashed by ________ Describing graphs in a paragraph, cont. • HW check: RB 37 – cont. decreased its taxes by _________ almost 50 %. 7) Finland _________ 2% rise 8) Last year there was a ___________ in VAT in Croatia. rose 9) In Croatia taxes ___________, while income from decreased taxes is __________________. small increase of 1.5% 10) The World Bank forecasted a ______________ in 2014. Practice describing a graph • Handout (start now, finish for HW) Source: www.fxstreet.com/rates-charts/bond-yield If you like, use the following sentences /phrases: The graph shows weekly yields on USD T-Bonds between 2005 and the present date. ... weekly yields on US government bonds with maturities ranging from 5 to 30 years. 30-yr, 10-yr and 5-yr T-Bond yields 5-yr T-Bond yield 30-yr yield HW check: Match up verbs with nouns MK, p 82, task Vocabulary 2 1 borrow ______ 9 deduct ______ _______ 2 finance ________ 10 issue ______ 3 issue ______ 11 pay (a rate of) ______ 4 pay a (higher) ______ 12 pay _________ 5 pay ______ 13 receive ______ ______ 6 raise ______ 14 repay ______ 15 sell ______ 7 deduct ______ 16 receive ________ 17 repay _____ 18 repay ______ 19 sell ______ HW check: Match up verbs with nouns borrow money deduct interest payments finance activities issue shares issue bonds pay (a rate of) interest pay a (higher) return pay dividends pay tax receive interest payments raise money repay principal sell assets deduct tax receive dividends repay bonds repay money sell bonds The Financing of Corporate Activity, RB p77 Based on: McConnell, C.R., Brue, S.L. (1996). Economics. McGraw-Hill Inc. Match headings with paragraphs Text headings: • Corporate finance • Stocks vs. Bonds • Bond risks Pg. 3 BOND RISKS RB, p 77-79 CORPORATE BOND RISKS 1. market value of bonds may fall, selling before maturity may cause you to incur a capital loss 2. price of existing bonds varies inversely with interest rates in the economy 3. inflation Revision: BOND RISKS – finish the sentences Corporate bonds are not .... riskless. The market value of bonds... varies over time in accordance with ... the financial health of the corporation. If the corporation falls on hard times and its financial integrity is shaken.... the market value of your bond may.... fall. Selling the bond on the bond market prior to... maturity (for less than its... nominal value) will cause... a capital loss. BOND RISKS, cont.– finish the sentences Market prices of bonds are also affected by... changes in interest rates. Increases in interest rates cause bond prices to ... fall. Decreases in interest rates cause ... bond prices to rise. In other words, the market value of a bond rises if it pays a ... higher fixed interest rate than the current interest rate. Bondholders face another element of risk due to... inflation. Substantial inflation will diminish the ... purchasing power of the... principal. You will have lent “dear” dollars, but... will be repaid in “cheap” dollars. Intro to stocks? CORPORATE FINANCE, RB p 77: Corporations (PLC’s) finance their activities in three ____ different ways. Internally, out of undistributed ________ corporate borrowing ________ profits _____ and externally, by _________ from financial institutions such as commercial savings & ____ loan ___________ associations* or banks, _______ insurance companies. Finally, corporations can stocks & _______. bonds issue ______ * štedno kreditna zadruga STOCKS VS. BONDS • A stock is an ________ ownership _____ share while a lending bond is not. A bond purchaser is ______ money to a corporation. • The stated value of a bond when it is first face / par / nominal value. issued is its _______________ • The amount lent to the corporation is the principal and the corporation promises to ______ repay it at a specified future date, also maturity date. known as the bond’s ______ • The bondholder also receives annual interest payments. ______ STOCKS VS. BONDS, cont. risky for two • Bonds are considered to be less ______ reasons: stockholders only after 1. Dividends can be paid to ___________ the interest rates due to bondholders have been paid. This means that bondholders have a legally _____ prior _____. claim _____ 2. If the corporation runs into problems, dividends and the stockholders may receive no ________ plummet / plunge / sink value of their stock may ___________________. Unless the corporation goes bankrupt, bondholders are guaranteed a fixed interest rate principal at _______. maturity and the return of the _______ HW MK, p 87: Reading Stocks and Shares