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[link] shows bond yield for two kinds of bonds: 10-year Treasury bonds (which are officially called “notes”) and corporate bonds issued by firms that have been given an AAA rating as relatively safe borrowers by Moody’s , an independent firm that publishes such ratings. Even though corporate bonds pay a higher interest rate, because firms are riskier borrowers than the federal government, the rates tend to rise and fall together. Treasury bonds typically pay more than bank accounts, and corporate bonds typically pay a higher interest rate than Treasury bonds.

Interest rates for corporate bonds and ten-year u.s. treasury bonds

The two lines on the graph show that interest rates of corporate bonds and 10-year U.S. Treasury bonds tend to rise and fall at similar times. Corporate bonds, however, have always maintained a higher interest rate than 10-year U.S. treasury bonds.
The interest rates for corporate bonds and U.S. Treasury bonds (officially “notes”) rise and fall together, depending on conditions for borrowers and lenders in financial markets for borrowing. The corporate bonds always pay a higher interest rate, to make up for the higher risk they have of defaulting compared with the U.S. government.

The bottom line for bonds: rate of return—low to moderate, depending on the risk of the borrower; risk—low to moderate, depending on whether interest rates in the economy change substantially after the bond is issued; liquidity—moderate, because the bond needs to be sold before the investor regains the cash.

Stocks

As stated earlier, the rate of return on a financial investment in a share of stock can come in two forms: as dividends paid by the firm and as a capital gain achieved by selling the stock for more than you paid. The range of possible returns from buying stock is mind-bending. Firms can decide to pay dividends or not. A stock price can rise to a multiple of its original price or sink all the way to zero. Even in short periods of time, well-established companies can see large movements in the price of their stock. For example, in July 1, 2011, Netflix stock peaked at $295 per share; one year later, on July 30, 2012, it was at $53.91 per share; in 2015, it had recovered to $414. When Facebook went public, its shares of stock sold for around $40 per share, but in 2015, they were selling for slightly over $83.

The reasons why stock prices fall and rise so abruptly will be discussed below, but first you need to know how we measure stock market performance. There are a number of different ways of measuring the overall performance of the stock market, based on averaging the stock prices of different subsets of companies. Perhaps the best-known measure of the stock markets is the Dow Jones Industrial Average, which is based on the stock prices of 30 large U.S. companies. Another gauge of stock market performance, the Standard&Poor’s 500, follows the stock prices of the 500 largest U.S. companies. The Wilshire 5000 tracks the stock prices of essentially all U.S. companies that have stock the public can buy and sell.

Other measures of stock markets focus on where stocks are traded. For example, the New York Stock Exchange monitors the performance of stocks that are traded on that exchange in New York City. The Nasdaq stock market includes about 3,600 stocks, with a concentration of technology stocks. [link] lists some of the most commonly cited measures of U.S. and international stock markets.

Questions & Answers

what is gasoline
Deepak Reply
how to know which products demand
Deepak
in other words economic can be define as what?
Ojarigho Reply
what is the difference between economics activities and economics system
Joshua Reply
what is the difference between price elasticity of demand and income elasticity of demand
Ellen Reply
what is demand
Alpha Reply
What is demand
Musa
is a measure of responsiveness at which a consumer is willing and able to offer a particular product at a given period of time
Manu
what is consumer
chill Reply
what is economics?
Odei Reply
economic development
favour Reply
what's economic activities
Mcjerry Reply
what is economic activity
Mcjerry
please can someone differentiate between an Economist view of cost and an Accountant view of cost
Mike
What's the relationship between scarcity and choice
Beverly Reply
when your income increase your demends increase
Ali Reply
what is the d/ce between cash flow and cash transection?
Ali
purchase power is demand or decrease in quantity of products in market as shortage is demand....
Baryali
urchase power is demand or decrease in quantity of products in market as shortage is demand...
Baryali
When purchasing power increases with the increase income, desire to get or purchase more quantity of goods increase which can be referred as demand. where as Shortage is a state or situation in which something needed cannot be obtained in sufficient amounts
Cool
what is demand
Gabriel Reply
Demand refers to the quantities of product or service that potential buyers are willing and able to buy.
Gcina
is the all your satistaction
Ali
yes
Fenteng
What are the causes of Monopoly
Alex Reply
more price, less quantite
Fermin
is the market which is clossed few people
Ali
Fermin and Ali Yusuf that is the causes of monopoly you people are naming or your are discussing about Demand.which one
Alex
what is national accounting
Ezichi Reply
is GDP good to measure living standard in countries
Samu Reply
When the GDP increase this will lead to high employment, high standards of living, high level of import and export, available of trade barrier
Rnooma

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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