Final answer:
Various types of companies can be registered under the Companies Act 71 of 2008, including private and public companies with different shareholder and trading characteristics. Banks act as financial intermediaries, facilitating transactions between savers and borrowers with various account types offering different terms. Bonds offer fixed-rate interest payments but carry risks such as interest rate changes, issuer creditworthiness, and prepayment.
Step-by-step explanation:
Under the Companies Act 71 of 2008, various types of companies can be registered which are differentiated based on their ownership, size, and legal requirements. There are primarily two types of companies: private companies and public companies. A private company is limited in terms of the number of shareholders it can have and typically does not offer its shares to the general public, while a public company can have an unlimited number of shareholders and its shares can be traded publicly on a stock exchange.
Shareholders of a company elect a board of directors responsible for choosing the company managers who oversee the day-to-day operations. This ensures that the owners have a level of control over the management without being involved in everyday business activities.
Banks are termed as financial intermediaries because they serve as a middleman between savers who deposit money and borrowers who take out loans. They play a crucial role in the financial system by reallocating funds from surplus units to deficit units.
Bank accounts come in several types, such as savings accounts, checking accounts, certificates of deposit (CDs), and money market accounts. Savings accounts typically offer interest over time but have limited withdrawal capabilities. Checking accounts are designed for frequent transactions, including deposits and withdrawals. CDs are time-bound and offer higher interest rates but withdraw funds before the maturity date typically incurs a penalty. Money market accounts usually offer higher interest rates than savings accounts and sometimes provide check-writing capabilities.
Bonds are considered somewhat risky investments because they can be affected by interest rate risk, credit risk, and prepayment risk. Although bonds make predetermined payments, if the interest rates rise after the bond has been purchased, the bond's price drops, and the investor could incur a loss if they need to sell the bond before maturity. Additionally, there's the risk that the bond issuer may default on payments.