4504c2 - 1 Investment Alternatives Categories of Financial...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Investment Alternatives Categories of Financial Markets: Marketable Nonmarketable Types of investing: Direct Indirect Nonmarketable Financial Assets Represent personal transactions between the owner and issuer Usually very liquid (ie. savings accts) Types: Savings Accts Certificate of Deposits Money Market Deposits NOW (Negotiable Orders of Withdrawals) EE Savings Bonds Money Market Securities o Short-term, highly liquid, relatively low risk Market dominated by financial institutions Purchased direct and indirect Money market rates are very close to each other o T-bills are a bit lower Types: Treasury Bills Obligation of U.S. Government Maturity: 3-6-9-12 mo. Sold on discount via an auction $10,000/5,000 Bid Stop Out Price Non-Competitive Bid Max 1 Mil par Avoid some risk reduced return failure to secure Low risk exempt from state taxes 7/9/1114:00 A7/P7 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
good secondary market REPURCHASE AGREEMENTS (Repo's or RP's) An acquisition of funds through the sale of securities with a simultaneous agreement to buy them back at a later date at an agreed upon price. Very flexible maturity Large denominations Secured Rate-close to Fed Funds but lower Not determined by rate on security underlying the Repo Issue Repo on face value of government security rather than on market value. No reserve requirements Participants Purpose liability management S/T use of funds COMMERCIAL PAPER S/T unsecured promissory note Minimum 25,000/$100,000 Exempt from regulation with SEC Original maturity a 270 days Proceeds finance current trans. Substitute for S/T bank loans Credit Ratings on Commercial Paper Standby letters of credit Yield: Y cp = Par-Price x 360 Price n NEGOTIABLE CD Active Secondary market Types Domestic Eurodollar Yankee 7/9/1114:00 A7/P7 2
Background image of page 2
BANKERS ACCEPTANCE (BA) Member of a broad class of finance institutions known as bills of exchange. Bills of Exchange - drafts or orders to pay a specified amount at a specified time drawn on individuals, business corp., or financial institutions. Drawee acknowledges the obligation - stamps "accepted" `Presto' we have an acceptance Letters of Credit - document which commits the bank to honor the draft drawn by a third party for the bank's customer (substitutes bank's credit for bank's customer's credit). Often used in International trade Maturities 30 to 270 days Good Secondary Market Functions as a S/T loan when bank holds the B.A. B.A. rates very close to the Neg. CD rate of the appropriate bank
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 07/09/2011 for the course FIN 4504 taught by Professor Banko during the Summer '08 term at University of Florida.

Page1 / 23

4504c2 - 1 Investment Alternatives Categories of Financial...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online