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Finance Principles - Essay Example
Author : morissetteanton
Finance & Accounting
Pages 3 (753 words)
Global financial market is currently facing ripple effects because of the austerity measures being witnessed in European countries. The capital market has witnessed the prices of shares going down and the risk of holding a bond rising . …
An investor will thus, take care of the rate of return to expect and the risk level exposed in the capital market in making a decision on stock and bond allocation. Equity and bond portfolio investment in U.S capital market: Equity investment; An equity investment is supposed to provide long term value growth and the possibility of dividend income. The value of shares can at some time become volatile by being either declining or a rising trend in the overall market period. The stock market index in U.S has being declining in the recent past due to the financial wrangles being witnessed in Europe. The future economic growth of the country is promising to be positive which is a clear picture that in future the prices of the stock will raise. Thus, as a fund manager the current stock prices are in the best lowest prices when I should consider buying for future profit making from sale of the shares in the future. Also, with an economic growth prospects the shares are likely to generate dividends which will be of benefit to the investor’s economic potential. Bond investment; A bond investment represents a fixed income investment because it attracts a fixed rate of interest and a known maturity time4. The value of a bond investment is determined by the movement of the market interest rates. ...