...1.0 Introduction Bond valuation is the determination of the fair price of a bond. As with any security or capital investment, the theoretical fair value of a bond is the present value of the stream of cash flows it is expected to generate. This essay is about different types of bonds and the instruction of the riskiness of bonds. Firstly, this essay will make a general overview of the types of bonds. Subsequently it will discuss the types of risks to which both bond investors and issuers are exposed. Finally it will make an analysis of the bond markets. 2.0 Basic information of bonds Bond is a form of long-term debt instrument. For example, a contractual liability, basically just a certificate showing that a borrower promises to repay interest and principal, on specific dates, to the holders of the bond. Bonds are one of the most important types of securities. There is a wide variety of these securities. It may seem confusing, but in actuality just a few characteristics distinguish the various types of bonds. 3.0 Various Types of Bonds Bonds are issued by both governments and corporations. Bonds are issued by public authorities, credit institutions, companies and supranational institutions in the primary markets. The most common process for issuing bonds is through underwriting. When a bond issue is underwritten, one or more securities firms or banks, forming a syndicate, buy the entire issue of bonds from the issuer and re-sell them to investors. The security firm...
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...Markets Debt and Equity Markets Primary and Secondary Markets Exchanges and Over-the-Counter Markets Money and Capital Markets 3. Financial Instruments Money Market Instruments Capital Market Instruments 4. Role of Financial Intermediaries Transaction Costs and Economies of Scale Risk Sharing and Diversification Adverse Selection and Moral Hazard 5. Types of Financial Intermediaries Depository Institutions (Banks) Contractual Savings Institutions Investment Intermediaries This chapter provides an overview of the financial system in the US economy by describing the various types of financial markets, financial instruments, and financial institutions or intermediaries that exist. 1 The chapter begins with a general statement that clarifies what function financial markets and financial intermediaries have in the economy as a whole. It then deals more specifically with: The structure of financial markets and the ways in which different types of financial markets can be distinguished. Here, it discusses debt versus equity markets, primary versus secondary markets, exchanges versus over-the-counter markets, and money versus capital markets. The various types of financial instruments, including both money market instruments and capital market instruments. The special role played by financial intermediaries in the economy. Here, it describes how financial intermediaries take advantage of economies of scale to reduce transaction costs, how financial institutions assist in the process of risk sharing and...
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...Bond Markets A bond is a debt security, or basically a loan, that an investor makes to a corporation, a government, an agency, or municipalities. In return for up-front cash, a corporation or government promises to make specific payments to a bondholder on specific dates. The bondholder can not only expect fixed payments but also the principle repayment when the bond reaches its maturity date (The Bond Market, 2002). A bond is considered a fixed-income security because the investor knows the exact amount of cash that will be paid back if the bond is held until maturity. A bond market is a financial marketplace where investors can purchase and sell various types of bonds or debt securities. It can be categorized into three main groups: issuers, underwriters, and purchasers. Issuers sell bonds or other debt securities in the bond market to finance the operations of their various organizations. The main issuers of the market are governments, banks, and corporations. Underwriters are traditionally made up of investment banks and other financial institutions that help the issuer to sell the bonds in the market. The need for underwriters is the greatest for corporation debt market because there are more risks involved. Purchasers are made up of those who buy the debt being issued in the market. They can include not only every group mentioned but also any other type of investor, including the individual. The largest player in the market is governments because they borrow and lend...
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...Debt and Equity Markets Primary and Secondary Markets Exchanges and Over-the-Counter Markets Money and Capital Markets 3. Financial Instruments Money Market Instruments Capital Market Instruments 4. Role of Financial Intermediaries Transaction Costs and Economies of Scale Risk Sharing and Diversification Adverse Selection and Moral Hazard 5. Types of Financial Intermediaries Depository Institutions (Banks) Contractual Savings Institutions Investment Intermediaries This chapter provides an overview of the financial system in the US economy by describing the various types of financial markets, financial instruments, and financial institutions or intermediaries that exist. 1 The chapter begins with a general statement that clarifies what function financial markets and financial intermediaries have in the economy as a whole. It then deals more specifically with: The structure of financial markets and the ways in which different types of financial markets can be distinguished. Here, it discusses debt versus equity markets, primary versus secondary markets, exchanges versus over-the-counter markets, and money versus capital markets. The various types of financial instruments, including both money market instruments and capital market instruments. The special role played by financial intermediaries in the economy. Here, it describes how financial intermediaries take advantage of economies of scale to reduce transaction costs, how financial institutions assist in the process of risk sharing and...
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...tenPOTENTIAL ISLAMIC CERTIFICATES FOR RESOURCE MOBILIZATION MOHAMED EL-HENNAWI* 1. INTRODUCTION The development of financial instruments has become an essential ingredient for the economic development of Islamic countries, most of which are underdeveloped. The absence of these instruments, together with the problem of limited resources and skills which are necessary to cope with the growing investment needs, tends to hinder the development process of these countries. Islamic countries need to stimulate higher domestic savings rates and to efficiently channel the savings into productive investments, as a precondition for accelerating economic growth. This calls for the development of relatively advanced financial markets with all the relevant components, such as new financial institutions, securities markets, etc. Islamic banks, national and international, have recently come into existence to play an important intermediary role in pooling savings, especially from small investors, and channelling them into productive investments. This role has been constrained, to a great extent, by the absence of capital markets and financial instruments based on shari'ah. Islamic banks, therefore, have embarked on a serious effort to develop their own instruments for mobilizing the funds of the Islamic Ummah and using them to foster economic and social development of the ummah. To be more specific, some of these banks suffer from excess liquidity, for which no suitable placements...
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...Security Analysis Assignment Question 1 There are several examples of the various types of mutual funds. In fact the list is listless but the most common ones include; Aggressive growth funds, Growth funds, Growth and Income Funds, Value Funds, International Equity Funds, US Government Income Funds, Municipal Bond Funds, Corporate Bond Funds, High Yield Bond Funds, Treasury Bills, Money Market Funds among many more. Load Mutual Funds are funds that have a sales charge or commission attached when they are purchased. The charge is used to compensate or pay for the services of the intermediary their time and expertise in selecting the appropriate mutual fund. Such charge is either paid while buying the funds or when selling them. On the other hand, No-Load Mutual Funds are either purchased directly or indirectly through a mutual fund company. These funds may have a small 12b-1 fee i.e. the cost of distribution which is incorporated into the fund as expense ratio. The expense ratio is paid by the shareholder of the fund on Daily basis through reduction of the price of the fund. Most investors prefer no-load funds since there is no more expenses required to pay for the broker services. Question 2 There are several types of mutual funds and they include the following; Stock Funds Stock Funds are at times referred as equity funds is a fund that invests in stocks which at times are also known as equity securities. These types of fund mainly consist of stock though it might have amount of cash...
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...for this type of huge purchase * Efficient market- Profit driven individuals that act on their own; where all assets, securities reflect any and all available public information at any instant in time; Investors also make sure the price reflects appropriately the expected earnings and the risks that are involved as well as the value of the firm Role in Finance- When the information that investors need to make investment decisions is widely available, thoroughly analyzed, and regularly used, the result is an efficient market. This is the case with securities traded on the major US stock markets. That means the price of a security is a clear indication of its value at the time it is traded. Conversely, an inefficient market is one in which there is limited information available for making rational investment decisions and limited trading volume. * Primary market- When new trades are put on the market that have not been sold or traded to investors. Role in Finance- Primary markets enable firms to raise capital through the sale of financial assets. Businesses are able to access potential investors that are outside its immediate influence. Businesses have to meet stringent market standards to issue securities at the primary market. The added scrutiny makes the issue more attractive to potential investors, and the company is able to raise the capital with lower costs. The company can also continue to raise more capital for future investments through multiple issues because...
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...1. INTRODUCTION TO INDIAN MARKETS THERE ARE TWO TYPES OF MARKETS IN INDIA MONEY MARKET Money market is a market for debt securities that pay off in the short term usually less than one year, for example the market for 90-days treasury bills. This market encompasses the trading and issuance of short term non equity debt instruments including treasury bills, commercial papers, bankers acceptance, certificates of deposits, etc. In other word we can also say that the Money Market is basically concerned with the issue and trading of securities with short term maturities or quasi-money instruments. The Instruments traded in the money-market are Treasury Bills, Certificates of Deposits (CDs), Commercial Paper (CPs), Bills of Exchange and other such instruments of short-term maturities (i.e. not exceeding 1 year with regard to the original maturity) CAPITAL MARKET Capital market is a market for long-term debt and equity shares. In this market, the capital funds comprising of both equity and debt are issued and traded. This also includes private placement sources of debt and equity as well as organized markets like stock exchanges. Capital market can be divided into Primary and Secondary Markets. PRIMARY MARKET In the primary market, securities are offered to public for subscription for the purpose of raising capital or fund. Secondary market is an equity trading avenue in which already existing/pre- issued securities are traded amongst investors. Secondary market could be...
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...INTRODUCTION TO CAPITAL MARKETS What is investment banking? Investment banks act as intermediaries in capital markets, helping the matching of sellers and buyers of various securities and advising institutional investors, government and companies on their investment strategies, on their financing needs (helping them to raise money) and their acquisitions. Two main areas: (1) Securities or capital markets divisions: trading in the equity, fixed income ,FX and commodities markets and advising and intermediating for institutional investors in those markets. (2) Corporate Finance and public finance (often referred to as investment banking) advising corporations and governments on their financing needs, including the underwriting of securities, on their merger and acquisition activities, or on their restructuring. Securities and capital markets divisions Clients are usually * Institutional investors, corporates or public entities, not private clients; * Mutual funds asset managers; * Pension Fund asset managers; * The insurance companies; * Private Banks; * Hedge Funds; * The treasury departments of large banks or large companies. Capital markets divisions * Equity division: equity research, equity sales, equity trading on cash, flow derivatives and structured products * FIRC or FICC (Fixed Income, currencies and derivatives): * Fixed income cash products, interest and credit derivatives...
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...yields after adjustment of tax on various instruments while taking investment decisions. The investors may seek advice from experts and consultants including agents and distributors of mutual funds schemes while making investment decisions. Types of investor In continuation of the lessons I’ve learned from Rich Dad Poor Dad author, Robert Kiyosaki, I will discuss today what he called “Types of Investors.” According to him, there are two main types of investors: Average Investors and Professional Investors. Average investors - buy packaged securities such as mutual funds, treasury bills, or real-estate-investment trusts. Professional investors - are more aggressive—they create investment opportunities or get in on the ground floor of new offerings, build businesses and marketing networks, assemble groups of financiers to fund deals too large for them to undertake alone, and pick the companies with the most promise for initial public offerings of stock. INVESTMENT AVENUES IN INDIA There are a large number of investment instruments available today. To make our lives easier we would classify or group them under 4 main types of investment avenues. We shall name and briefly describe them. Financial securities: These investment instruments are freely tradable and negotiable. These would include equity shares, preference shares, convertible debentures, non-convertible debentures, public sector bonds, savings certificates, gilt-edged...
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...the year 1964 with its roots embedded into Unit Trust of India (UTI). Since its inception in 1964 there were only 25cr assets under management like a sapling but it has grown into a big banyan tree with assets of Rs. 481749cr under assets management companies till March 2010. But presently it has increases up to 700538cr at the end of March 2011. Now, booming stock markets & innovative marketing strategies of mutual fund companies in India are influencing the retail investors to invest their surplus funds with different schemes of mutual fund companies with or without complete understanding of Mutual Funds (MF). This paper focuses on the analysis of the mutual funds, its benefits, and drawbacks and I have made a detailed summary on its various aspects. Keeping in mind the rise and fall in the money market it is better to invest in mutual funds for those investors who are risk adverse and for those who are risk taker it is better for them to invest in share market. I have...
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...l distance to bank branches it offers more time for customers' productive activities. BANK LENDING Lending money is one of the primary functions of the bank. Lending of funds to individuals, traders, businessmen and industrial enterprises, is one of the important activities of commercial banks. Interest earns on these loans and advances are the major source of income of the banks. Interest given on deposits is lower than the interest received on such loans and advances. Amount deposited by the customers forms the main source of loans and advances. Banks lend money in various forms for various purposes. Operation and expansion of business and commercial activities depend a great deal on the availability of loans/advances from commercial banks. The term ‘loan’ refers to the amount borrowed by one person from another. The amount is in the nature of loan and refers to the sum paid to the borrower. Thus from the view point of borrower, it is ‘borrowing’ and from the view point of bank, it is ‘lending’. Loan may be regarded as ‘credit’ granted where the money is disbursed and its recovery is made on a later date. It is a debt for the borrower. While granting loans, credit is given for a definite purpose and for a predetermined period. Interest is charged on the loan at agreed rate and intervals of payment. ‘Advance’ on the other hand, is a ‘credit facility’ granted by the bank. Banks grant advances largely for short-term purposes, such as purchase of goods traded in and meeting other...
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...GUIDE FOR STUDENTS // 2014 CONTENTS 02 INTRODUCTION 03 BLOOMBERG TERMINAL 03 The Bloomberg Keyboard 03 Helpful Keys 04 Accessing The Application 05 Logging In 06 Bloomberg Panels 07 FUNCTIONS & SECURITIES 07 Running Functions 08 Working With Securities 10 NAVIGATION 10 Basic search (Autocomplete) 11 Full Search 12 Browsing Menus 13 PERFORMING ANALYSIS 13 Navigating Functions 14 Stock/Company Screening 15 Analyzing a Company 16 Analyzing an Index, Bond or Currency 17 EXPORTING DATA 17 The Bloomberg Excel Add-In 20 Drag & Drop 20 Printing & Other Export Options 20 GETTING HELP & LEARNING MORE 22 APPENDIX 22 Equity 22 Fundamental Analysis 23 Analytics 24 M&A Analysis 24 Fixed Income 26 Swaps 27 Money Markets 28 Structured Finance Analytics 29 Price Discovery 29 Analytics 29 Descriptive 30 Relative Value 30 Ticketing 30 Hedging 30 Additional Fixed-Income Functions 32 FI Futures & Options 33 Repo Analysis Data 33 CALCULATORS 33 High Yield/Syndicated Loans/ Distressed Research 34 Municipal Bonds INTRODUCTION For more than 20 years, Bloomberg has been committed to helping universities and colleges incorporate the Bloomberg Professional® service into their academic programs to better prepare students for the global job market. Universities and colleges around the globe use Bloomberg to bring the real world of finance into the classroom, providing students with access to the same information platform used by leading decision makers in business, finance and...
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...GUIDE FOR STUDENTS // FEbRUaRy 2012 CONTENTS>>>>>>>>>> 02 bLOOMbERG TERMINaL® 02 The bloomberg Keyboard 03 accessing the application 04 Logging In 05 bloomberg Panels 06 FUNCTIONS & SECURITIES 06 Running Functions 07 Working with Securities 09 basic Search (autocomplete) 10 Full Search 11 browsing Menus 09 NavIGaTION 12 PERFORMING aNaLySIS 12 Navigating Functions 13 Stock/Company Screening 14 analyzing a Company 15 analyzing an Index, bond or Currency 16 ExPORTING DaTa 16 The bloomberg Excel add-In 19 Drag & Drop 19 Printing and Other Export Options 20 GETTING HELP aND LEaRNING MORE CONTENTS>>>>>>>>>> 21 aPPENDIx 21 Equity 21 Fundamental analysis 22 analytics 23 M&a analysis 23 Fixed Income 25 Swaps 26 Money Markets 27 Structured Finance analytics 28 Price Discovery 29 analytics 29 Descriptive 29 Relative value 29 Ticketing 29 Hedging 30 additional FI Functions 31 FI Futures and Options 32 Repo analysis Data 32 Calculators 33 High yield/Syndicated Loans/Distressed Research 34 Municipal bonds INTRODUCTION For more than 20 years, bloomberg has been committed to helping universities and colleges incorporate the bLOOMbERG PROFESSIONaL® service into their academic programs to better prepare students for the global job market. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Universities and colleges around the globe use Bloomberg to bring the real world of finance into the classroom, providing students with access to the same information platform...
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...Disadvantages of Stocks and Bonds Name Institution Advantages and Disadvantages of Stocks and Bonds Introduction Stocks and bonds qualify as the two major classes of assets that are used by investors in planning their portfolios for investment. Stocks offer the investors an opportunity to have a stake in the company, whereas the bonds are affiliated to the loans that are made to a company. Generally stocks are considered to be very volatile and much risky to invest in as compared to the investment in bond (Alexieff, 2014). However there exist different stock and bond types that have with them varying volatility levels and the risks also vary. Types of Stocks and Bonds There exist different types of stocks and bonds from which an investor could choose from. Out of these stock and bond types, some make sound investment records than other types of bonds or stocks. Types of Stocks Stocks are classified under two major categories which include common stocks and the preferred stocks. The preferred stock is further classified into the participating and the non-participating stocks. Majorly most investors usually trade in the common stocks only (Veale & New York Institute of Finance, 2011). Under the common stocks, it is very easy to evaluate stock types depending on a number of primary factors. Diversified investment portfolios involve wide and vast company types of stocks. Stocks can be classified as follows: Stocks by size- there are various types of companies that one...
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