Asset Classes & Finacial Instruments - Chapt 2 - Prof Notes

Asset Classes & Finacial Instruments - Chapt 2 - Prof...

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CHAPTER 2 Asset Classes and Financial Instruments
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Major Classes of Financial Assets or Securities Money market instruments Bond market securities Equity Securities Stock market indexes Derivative markets
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The Money Market • Sub-sector of fixed income markets • Highly liquid securities • Short maturities • Traded in large denominations – As a result out of reach for individual investors, except through MMMf • Low credit risk (ABCP)
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Rates on Money Market Securities
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The Money Market Treasury bills or T-Bills – Govt. raises money through T-Bills – Govt. issue, 28/91/182 day maturity – Most marketable, very liquid – Very low risk – Quoted on yields – Sold to investors at a discount – On maturity, the investor gets full face value of the bill – The difference between price paid, and the maturity value received (face value) is the return to investor
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