PORTFOLIOFINANCIAL INSTITUTIONGroup members: Ajmal Hayat (17122)Tabish Faisal (17118)Hammad Asif (16982)Faculty: Miss Tazeen ArsalanSection: FIN 301-ADate: 25thApril’16Institute of Business Management
Table of ContentsIntroduction of financial productsWhy choosing this product?Opportunity cost of each product (What would be the next best options)Calculation of the ReturnHow would we receive money (Which Channel)?Financial Products:1.Term Deposit Certificate 2.Bonds (Government)3. Currency4.Investment in Shares 5.Money Market Fund 6.International Corporate Bond 7.Gold Fund 8.Investment in small and medium enterprise.9.Venture Capital10.
1- Investment in Term Deposit CertificateIntroduction:A term deposit is a deposit held at a financial institution that has a fixed term. These are generally short-term with maturities ranging anywhere from a month to a few years. When a term deposit is purchased,the lender (the customer) understands that the money can only be withdrawn after the term has endedor by giving a predetermined number of days’ notice. These types of financial products are sold bybanks, thrift institutions and credit unions.Also known as certificates of deposit (CDs), time deposits and "bonds" in England, term deposits are anextremely safe investment and are therefore very appealing to conservative, low-risk investors. Termdeposits sold by banks are insured by the Federal Deposit Insurance Corporation and the National CreditUnion Administration for credit unions. Term deposits, because they allow banks to hold onto a depositfor a specific amount of time, allow banks to invest in higher gain financial products.Why choosing this products?For the investment purpose we have chosen the Term Deposit Certificate of MCB bank. MCB bank is currently offering return of 7.27% per year on the term deposit certificate. The rate of 7.27% is 1.71% higher than the average 5.56%. Also it is the highest rate for this term period (Updated on March,2016). The interest rate is applicable for the MCB PKR term deposit product and for a time horizon of One year.This is for deposit amounts of 500k PKR and above at maturity.
What would be the next best options?Currently MCB is offering the highest rate of return on term deposit certificate of 7.27%. After MCB thereis Habib Bank which is offering 5% return and National Bank of Pakistan which is offering 4.40% return onthe term deposit certificate in 1 year period. So for us investing in the MCB Bank’s Term Deposit Certificate was the best option available.Calculation of the Return:Amount Invested =5,000,000Rate of Return = 7.27%Amount to be Received after 1 Year = 363,500Total amount after 1 Year = 5,363,5002- Investment in Government BondsIntroduction:Agovernment bondis abondissued by a national government, generally with a promise to pay periodic interest payments and to repay the face value on the maturity date. Government bonds are usually denominated in the country's owncurrency. Another term similar to government bond is "sovereign bond". Technically any bond issued by a sovereign entity is a sovereign bond but sometimes the term is