A legal entity that sells securities in order to finance its own operations. Needs capital to grow and prosper.
What are the typical entities that could be an 'issuer'?
Business and governments (to pay their bills)
What is the purpose of the securities industry?
To match investors who have money with issuers that need funding.
What are financial firms general roles in the markets?
Provide the bridge between investors with capital and those that need funding.
What are the two primary methods by which issuers raise capital using the markets?
Issuing debt securities (bonds), and issuing equity securities (stocks)
What is a bond?
A publicly traded loan - evidences the amount of indebtedness of an issuer. The creditors (investors) who purchase bonds lend their funds to the issuer for a specified period (until maturity). The issuer of the bond is required to repay the principal balance at a future date and will typically make interest payments over the life of the loan.