ch1_outline - Investment Analysis Chapter 1 I Real Assets...

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Investment Analysis Chapter 1 I. Real Assets vs. Financial Assets a. Real assets: land, buildings, equipment, and knowledge than can be used to produce goods and services b. Financial assets: stocks and bonds; claims on real assets or the income produced by real assets c. Financial assets define the allocation of income or wealth among investors; used to consume wealth today or defer it for the future II. A Taxonomy of Financial Assets a. Fixed-income: debt securities—fixed stream of income b. Money market refers to fixed-income securities that are short term, highly marketable, and generally of very low risk c. Capital market—long-term securities d. Equity securities: represents an ownership share; the performance of equity investments is tied directly to the success of the firm and its real assets e. Equity securities primary use is for the separation of ownership & control f. Derivative securities: value derived from the value of the underlying asset; better models to value; focused on risk reduction not speculation g. Types of derivatives: futures/forwards—everything is defined, a derivative because it will happen in the future, not right now (spot);
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