{"lesson":{"id":7,"moduleId":3,"slug":"what-is-a-bond","title":"What is a bond?","summary":"You understand what a bond is, how it structurally differs from a share, and what default risk is.","bodyMarkdown":"## Objectives\n\nBy the end of this lesson you understand what a bond is, how it structurally differs from a share, and what default risk is.\n\n## Content\n\nA bond is a debt instrument: the buyer lends money to the issuer -- a company or a government -- in exchange for periodic interest payments (the coupon) and repayment of the principal on a specific future date (maturity).\n\nBonds are also known as **fixed income**, because the issuer agrees on the interest rate and repayment date in advance -- unlike a share, that agreed-upon return doesn't depend on how the company performs in the future.\n\nUnlike a share, a bond carries no ownership or voting rights: the bondholder is a creditor, not a part-owner. This has an important consequence if the issuing company runs into serious financial trouble: creditors (bondholders) get paid before shareholders if the company is liquidated -- shareholders are last in line, and often recover nothing.\n\nA bond's main risk is default risk, also called credit risk: the possibility that the issuer can't pay the interest or repay the borrowed principal. Not all bonds are equally safe -- a bond from a government with solid finances is considered much safer than one from a heavily indebted company, and that lower risk is usually reflected in a lower interest rate. The higher the perceived default risk, the higher the interest the market tends to demand in exchange for taking it on.\n\nA bond's price, like a share's, can also change on the secondary market before maturity -- it typically moves in the opposite direction to general interest rates, something explained in more detail later in the curriculum.\n\n## Example\n\nWhen a government needs to fund its public spending, it can issue government bonds: whoever buys them lends money to the government in exchange for periodic interest and repayment of the principal on the agreed maturity date, for example in 10 years.\n\n## Common mistakes\n\n- Confusing a bond with a share just because both are \"something you buy in the market\" -- a bond is debt with a fixed repayment date, a share is indefinite ownership with no repayment date.\n- Assuming all bonds are equally safe -- default risk varies enormously depending on who issues them.\n\n## Summary\n\nA bond is a loan -- also known as fixed income, because the interest and repayment of the principal are agreed in advance: the buyer lends money in exchange for periodic interest and repayment of the principal at maturity. Unlike a share, it carries no ownership or voting rights, and bondholders get paid before shareholders if the company is liquidated. Default risk varies according to the financial strength of whoever issues the bond.\n\n## Self-check\n\nWhat's the fundamental difference between being a shareholder and being a bondholder of the same company?\n\nWhy does a bond with higher default risk usually offer a higher interest rate?","bodyHtml":"<h2>Objectives</h2>\n<p>By the end of this lesson you understand what a bond is, how it structurally differs from a share, and what default risk is.</p>\n<h2>Content</h2>\n<p>A bond is a debt instrument: the buyer lends money to the issuer -- a company or a government -- in exchange for periodic interest payments (the coupon) and repayment of the principal on a specific future date (maturity).</p>\n<p>Bonds are also known as <strong>fixed income</strong>, because the issuer agrees on the interest rate and repayment date in advance -- unlike a share, that agreed-upon return doesn't depend on how the company performs in the future.</p>\n<p>Unlike a share, a bond carries no ownership or voting rights: the bondholder is a creditor, not a part-owner. This has an important consequence if the issuing company runs into serious financial trouble: creditors (bondholders) get paid before shareholders if the company is liquidated -- shareholders are last in line, and often recover nothing.</p>\n<p>A bond's main risk is default risk, also called credit risk: the possibility that the issuer can't pay the interest or repay the borrowed principal. Not all bonds are equally safe -- a bond from a government with solid finances is considered much safer than one from a heavily indebted company, and that lower risk is usually reflected in a lower interest rate. The higher the perceived default risk, the higher the interest the market tends to demand in exchange for taking it on.</p>\n<p>A bond's price, like a share's, can also change on the secondary market before maturity -- it typically moves in the opposite direction to general interest rates, something explained in more detail later in the curriculum.</p>\n<h2>Example</h2>\n<p>When a government needs to fund its public spending, it can issue government bonds: whoever buys them lends money to the government in exchange for periodic interest and repayment of the principal on the agreed maturity date, for example in 10 years.</p>\n<h2>Common mistakes</h2>\n<ul><li>Confusing a bond with a share just because both are &quot;something you buy in the market&quot; -- a bond is debt with a fixed repayment date, a share is indefinite ownership with no repayment date.</li><li>Assuming all bonds are equally safe -- default risk varies enormously depending on who issues them.</li></ul>\n<h2>Summary</h2>\n<p>A bond is a loan -- also known as fixed income, because the interest and repayment of the principal are agreed in advance: the buyer lends money in exchange for periodic interest and repayment of the principal at maturity. Unlike a share, it carries no ownership or voting rights, and bondholders get paid before shareholders if the company is liquidated. Default risk varies according to the financial strength of whoever issues the bond.</p>\n<h2>Self-check</h2>\n<p>What's the fundamental difference between being a shareholder and being a bondholder of the same company?</p>\n<p>Why does a bond with higher default risk usually offer a higher interest rate?</p>","sortOrder":2,"readingMinutes":5,"difficulty":"Básico"},"previous":{"id":6,"moduleId":3,"slug":"what-is-a-share","title":"What is a share?","summary":"You understand what a share is, what rights it gives its holder, and why its price is set by the market and not by the company that issues it.","bodyMarkdown":"## Objectives\n\nBy the end of this lesson you understand what a share is, what rights it gives its holder, and why its price is set by the market and not by the company that issues it.\n\n## Content\n\nA share is a security that represents a proportional part of a company's ownership. When you buy a share, you're not lending money to the company: you become a part-owner of it, in the exact proportion that share represents of the total shares outstanding.\n\nShares are also known as **equities**, precisely because they offer no return agreed in advance: what you gain or lose depends entirely on how the price performs in the market and on whether the company decides to distribute profits, never on a figure promised when you bought it.\n\nBeing a shareholder grants, in principle, two rights: the right to a proportional share of profits, if the company decides to distribute them as a dividend; and voting rights at the shareholders' meeting, also proportional to the number of shares you hold. In practice, if your stake is small compared to other shareholders -- funds, other large investors -- that voting right carries little weight, but it still exists.\n\nA share's price isn't set by the company or by any body: it's determined by the market, through the same supply-and-demand mechanism you already saw in the previous module. That's why a share's price can move constantly during market hours, even though nothing has changed about the company at that specific moment -- what changes is investors' collective perception of its future value.\n\nIt's important to note something often overlooked: the number of shares a company has isn't fixed forever. It can increase (a capital increase) or, more rarely, decrease (a share buyback). When the number of shares increases, each existing shareholder's proportional stake shrinks, even if they haven't sold anything -- this is called dilution.\n\n## Example\n\nIf a company like Apple has on the order of 15 billion shares outstanding and you buy a single share, your stake in the company's ownership is tiny -- but real: you have the right, proportional to that one share, to whatever profits it distributes and to vote at its shareholders' meeting.\n\n## Common mistakes\n\n- Thinking a share is a loan to the company, as if it were a bond -- a share is ownership, not debt; whoever lends money to a company in exchange for interest buys a bond, not a share.\n- Believing that the number of a company's shares is fixed -- it can increase (a capital increase, diluting existing shareholders) or decrease (a share buyback).\n\n## Summary\n\nA share is a proportional part of a company's ownership, not a loan -- it's also known as equity, because it offers no fixed return agreed in advance. It grants a right to a share of profits, if distributed, and a vote at the shareholders' meeting. Its price is set by the market, not the company, and the number of shares outstanding can change over time.\n\n## Self-check\n\nWhy is buying a share not the same as lending money to a company?\n\nWhat happens to your ownership percentage if the company does a capital increase and you don't buy any new shares?","bodyHtml":"<h2>Objectives</h2>\n<p>By the end of this lesson you understand what a share is, what rights it gives its holder, and why its price is set by the market and not by the company that issues it.</p>\n<h2>Content</h2>\n<p>A share is a security that represents a proportional part of a company's ownership. When you buy a share, you're not lending money to the company: you become a part-owner of it, in the exact proportion that share represents of the total shares outstanding.</p>\n<p>Shares are also known as <strong>equities</strong>, precisely because they offer no return agreed in advance: what you gain or lose depends entirely on how the price performs in the market and on whether the company decides to distribute profits, never on a figure promised when you bought it.</p>\n<p>Being a shareholder grants, in principle, two rights: the right to a proportional share of profits, if the company decides to distribute them as a dividend; and voting rights at the shareholders' meeting, also proportional to the number of shares you hold. In practice, if your stake is small compared to other shareholders -- funds, other large investors -- that voting right carries little weight, but it still exists.</p>\n<p>A share's price isn't set by the company or by any body: it's determined by the market, through the same supply-and-demand mechanism you already saw in the previous module. That's why a share's price can move constantly during market hours, even though nothing has changed about the company at that specific moment -- what changes is investors' collective perception of its future value.</p>\n<p>It's important to note something often overlooked: the number of shares a company has isn't fixed forever. It can increase (a capital increase) or, more rarely, decrease (a share buyback). When the number of shares increases, each existing shareholder's proportional stake shrinks, even if they haven't sold anything -- this is called dilution.</p>\n<h2>Example</h2>\n<p>If a company like Apple has on the order of 15 billion shares outstanding and you buy a single share, your stake in the company's ownership is tiny -- but real: you have the right, proportional to that one share, to whatever profits it distributes and to vote at its shareholders' meeting.</p>\n<h2>Common mistakes</h2>\n<ul><li>Thinking a share is a loan to the company, as if it were a bond -- a share is ownership, not debt; whoever lends money to a company in exchange for interest buys a bond, not a share.</li><li>Believing that the number of a company's shares is fixed -- it can increase (a capital increase, diluting existing shareholders) or decrease (a share buyback).</li></ul>\n<h2>Summary</h2>\n<p>A share is a proportional part of a company's ownership, not a loan -- it's also known as equity, because it offers no fixed return agreed in advance. It grants a right to a share of profits, if distributed, and a vote at the shareholders' meeting. Its price is set by the market, not the company, and the number of shares outstanding can change over time.</p>\n<h2>Self-check</h2>\n<p>Why is buying a share not the same as lending money to a company?</p>\n<p>What happens to your ownership percentage if the company does a capital increase and you don't buy any new shares?</p>","sortOrder":1,"readingMinutes":5,"difficulty":"Básico"},"next":{"id":8,"moduleId":3,"slug":"currencies-and-commodities-as-assets","title":"What are currencies and commodities as assets?","summary":"You recognize currencies and commodities as asset classes with their own logic, distinct from stocks and bonds.","bodyMarkdown":"## Objectives\n\nBy the end of this lesson you recognize currencies and commodities as asset classes with their own logic, distinct from stocks and bonds.\n\n## Content\n\nSo far you've seen two asset classes that represent a relationship with a company: the share (ownership) and the bond (debt). Currencies and commodities are different: they don't represent a relationship with any specific company, but with a currency or a physical good.\n\nA currency is the money of a country or an economic region -- the dollar, the euro, the yen. \"Investing in currencies\" actually means speculating on the exchange rate between two currencies: buying one currency expecting it to appreciate against another. Its value doesn't depend on any company's profits, but on macroeconomic factors -- monetary policy, inflation, a country's trade balance against another -- explained in more detail in later levels of the curriculum.\n\nA commodity is a basic physical good, generally interchangeable between different producers: oil, gold, wheat, copper. Unlike a share, a commodity generates no profits and distributes nothing -- its return depends solely on whether its price rises or falls, determined by physical supply and demand for the good itself: how much is produced, how much is consumed, and expectations about both.\n\nBoth currencies and commodities trade on their own markets, with their own rules, separate from the stock and bond market -- but they're part, just like those, of the set of financial assets an investor can consider.\n\n## Example\n\nGold is a classic commodity: it pays no dividends or interest, but many investors buy it as a safe haven during periods of economic uncertainty, expecting its price to rise when other assets fall.\n\n## Common mistakes\n\n- Thinking a commodity generates income like a share (dividends) or a bond (coupons) -- its only source of return is the change in its own price.\n- Believing a currency's value depends on a company or a balance sheet -- it depends on a country's or region's macroeconomic factors, not on any specific entity.\n\n## Summary\n\nCurrencies and commodities are asset classes distinct from stocks and bonds: they don't represent ownership or debt of a company, but the value of a currency or a physical good. Their return depends on the change in their own price, determined by factors specific to each market.\n\n## Self-check\n\nWhy doesn't a commodity generate \"profits\" the same way a share does?\n\nWhat mainly determines a currency's value?","bodyHtml":"<h2>Objectives</h2>\n<p>By the end of this lesson you recognize currencies and commodities as asset classes with their own logic, distinct from stocks and bonds.</p>\n<h2>Content</h2>\n<p>So far you've seen two asset classes that represent a relationship with a company: the share (ownership) and the bond (debt). Currencies and commodities are different: they don't represent a relationship with any specific company, but with a currency or a physical good.</p>\n<p>A currency is the money of a country or an economic region -- the dollar, the euro, the yen. &quot;Investing in currencies&quot; actually means speculating on the exchange rate between two currencies: buying one currency expecting it to appreciate against another. Its value doesn't depend on any company's profits, but on macroeconomic factors -- monetary policy, inflation, a country's trade balance against another -- explained in more detail in later levels of the curriculum.</p>\n<p>A commodity is a basic physical good, generally interchangeable between different producers: oil, gold, wheat, copper. Unlike a share, a commodity generates no profits and distributes nothing -- its return depends solely on whether its price rises or falls, determined by physical supply and demand for the good itself: how much is produced, how much is consumed, and expectations about both.</p>\n<p>Both currencies and commodities trade on their own markets, with their own rules, separate from the stock and bond market -- but they're part, just like those, of the set of financial assets an investor can consider.</p>\n<h2>Example</h2>\n<p>Gold is a classic commodity: it pays no dividends or interest, but many investors buy it as a safe haven during periods of economic uncertainty, expecting its price to rise when other assets fall.</p>\n<h2>Common mistakes</h2>\n<ul><li>Thinking a commodity generates income like a share (dividends) or a bond (coupons) -- its only source of return is the change in its own price.</li><li>Believing a currency's value depends on a company or a balance sheet -- it depends on a country's or region's macroeconomic factors, not on any specific entity.</li></ul>\n<h2>Summary</h2>\n<p>Currencies and commodities are asset classes distinct from stocks and bonds: they don't represent ownership or debt of a company, but the value of a currency or a physical good. Their return depends on the change in their own price, determined by factors specific to each market.</p>\n<h2>Self-check</h2>\n<p>Why doesn't a commodity generate &quot;profits&quot; the same way a share does?</p>\n<p>What mainly determines a currency's value?</p>","sortOrder":3,"readingMinutes":5,"difficulty":"Básico"},"pathContext":null,"curatedLinks":{"prerequisite":[],"continuation":[],"related":[]},"relatedConcepts":[{"concept":{"id":8,"slug":"bond","term":"Bond","shortDefinition":"A debt instrument: the buyer lends money to the issuer (a company or a government) in exchange for periodic interest payments and repayment of the principal on a future maturity date.","longDefinition":"Unlike a share, a bond carries no ownership or voting rights: the bondholder is a creditor, not a part-owner. Creditors (bondholders) get paid before shareholders if the company is liquidated. A bond's main risk is default risk (credit risk) -- the possibility that the issuer can't pay the interest or repay the principal. Not all bonds are equally safe: a bond from a government with solid finances is considered much safer than one from a heavily indebted company, and that lower risk is usually reflected in a lower interest rate. The higher the perceived default risk, the higher the interest the market tends to demand in exchange for taking it on. A bond's price, like a share's, can also change on the secondary market before maturity -- typically moving in the opposite direction to general interest rates."}}]}