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Unformatted text preview: 1-1INVESTMENT ENVIRONMENTCHAPTER 11-2Outline of the Chapter• Real assets vs Financial Assets• Classification of Financial Assets• Financial Markets and the Economy• The Investment Process• The Competitiveness of the Financial Markets• The Players in the Financial Markets• Recent Trends in the Financial Markets1-3Real Assets Versus Financial Assets• What is investment?– Reduced current consumption– Planned later consumption• Real Assets– Assets used to produce goods and services• Financial Assets– Claims on real assets1-4A Taxonomy (Classification) of Financial Assets •Fixed income or debt–Money market instruments• Treasury Bills, Bank certificates of deposit, Repos and reverses, –Capital market instruments• Bonds– Treasury bonds, bonds issued by federal agencies, state and local municipalities, corporations•Common stock or equity– Represent an ownership share in a corporation•Derivative securities1-5Financial Markets and the Economy•Information Role– Stock prices reflect the collective judgement of professionals– Stock market encourages the allocation of capital to those firms that have the best prospect•Consumption Timing– Shift the purchasing power from high-earning...
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- Spring '10