How are stocks and shares valued?
Common stocks represent a share in the ownership of a company and their value mainly depends on the level of profits. Bonds represent debts owing by a company and their value mainly depends upon financial strength. Bonds which are documents acknowledging a debt by the issuer of the bonds to the holders of the bonds – are valued by reference to the rate of interest paid to the holders of the bonds. The Government can raise money at the lowest rate of interest; publicly owned bodies may have to pay a little more and private borrowers have to pay more again, depending on their creditworthiness and the size and liquidity of the issue. In other markets good quality corporate bonds can have an interest rate about one percent more than a government bond (meaning that if the Government is borrowing at 5%, a good corporate issuer may borrow at 6%) Shares which represent part ownership of a company are usually valued partly by reference to the dividend they pay (which is comparable with the inte
