INTRODUCTION
Investment instrument is a document such as bond and share certificate that has monetary value through agreement that agrees make payment of money to another parties for purpose gain equity capital or loan capital. An investment instrument give a promise of earnings and return to the holders or recipient. It also called as financing instruments. There are three common types of investment instruments in the market which are money markets, bonds and common shares.
Money market is the short-term loan market which is less than one year maturities with relatively liquid and low-risk debt due to short duration. Governments and large corporations are usually issued the money market securities in forms of banker’s acceptance, certificates of deposit and commercial papers. The money market instruments have a lower risk compare to others instruments. As a result of lower risk and relatively liquid instrument, thus money market instruments get a lower return compared to others investment. Money markets also called as cash investment.
Bond is a long-term debt instruments which is more than one year maturities with the purpose of lend money for raising capital at specific period at fixed interest rate. Bonds are usually used by companies or government to finance a different type of activities and project. The risk level of bond instrument is considered lower risk than common shares. However, if an investor investing in junk bonds can be very risky to investor. The return of bond instrument have divided into two components which are yield-to-maturity and coupon. The yield-to-maturity is the average annual rates of returns to investor if the investor holds the bonds until maturity. The coupon is the annual interest receive by the investor each year up to maturity. Some bond like zero coupon bond can be redeemed at the full face value when it reach the maturity date