Investment alternatives

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Investment alternatives

  1. 1. Organizing Financial Assets Direct Investing  Investors buy and sell securities themselves, typically through brokerage accounts. Indirect Investing  The buying and selling of the shares of investment companies, which in turn hold portfolios of securities.
  2. 2. Direct Investing Non marketable Financial Assets  Savings deposits  Certificates of deposits  Money market deposit account Money Market  Treasury bills  Commercial Papers  Euro Dollars  Banker’s acceptances
  3. 3. Direct Investing Capital Market  Fixed income  Equities Derivatives market  Options  Futures contracts
  4. 4. Indirect Investing Investment companies  Unit Investment trust (NIT)  Mutual Funds  Open end mutual funds  Closed end mutual funds
  5. 5. Money Market Securities Treasury Bill Discount Yield =  Face value – pur price * 360 Face value maturity of bill in days Investment yield =  Face value – pur price * 365 Pur. Price maturity of bill in days
  6. 6. Fixed Income Securites Capital Market Fixed income securities Bonds Call provision Zero coupon bond
  7. 7. Fixed Income Securites Types of Bonds  Treasury Bonds  Municipal Bonds  Corporates  Senior Securities  Debenture  Convertible Bonds  Junk Bonds
  8. 8. Equity Securities Preferred Stock Common Stock Characteristics of Common Stocks  Book Value  Dividends  Dividend Yield  Payout Ratio  Stock Dividend  Stock Split
  9. 9. Equity Securities P/E Ratio  Also called Earning Multiplier  Can be 10 or 15 times  Shows the investor confidence on a particular stock
  10. 10. Derivative Securities Securities that derive their value in whole or in part by having a claim on some underlying security. Warrant  A corporate created option to purchase a stated number of common shares at a specified price within a specified time.
  11. 11. Derivative Securities Options  Put Option  Call Option  LEAPS Futures Contracts

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