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.
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
Direct Investing Capital Market Fixed income Equities Derivatives market Options Futures contracts
Indirect Investing Investment companies Unit Investment trust (NIT) Mutual Funds Open end mutual funds Closed end mutual funds
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
Fixed Income Securites Capital Market Fixed income securities Bonds Call provision Zero coupon bond
Fixed Income Securites Types of Bonds Treasury Bonds Municipal Bonds Corporates Senior Securities Debenture Convertible Bonds Junk Bonds
Equity Securities Preferred Stock Common Stock Characteristics of Common Stocks Book Value Dividends Dividend Yield Payout Ratio Stock Dividend Stock Split
Equity Securities P/E Ratio Also called Earning Multiplier Can be 10 or 15 times Shows the investor confidence on a particular stock
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.