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Research Paper on Assets - Essay Example
Pages 12 (3012 words)
There are many financial instruments with distinguished characteristics. The capital market instruments have maturities of more than one year. Financial market instruments having maturities of intermediate term (1-10 years) and long term (more than 10 years) are included in the capital market instruments.
Since 1961, however, banks have issued negotiable CDs. They now are traded actively in a secondary money market.
Corporations can raise funds by issuing stock or selling bonds. Business equities are shares of ownership, such as stock that corporations issue. Owners of equities are residual claimants on the income and the net worth of a corporation. The equity holders of a company are paid after all the debts of a company is paid. The significant characteristic of equities is the variation of returns with the profitability of the company. An investor can become the owner of a corporation by purchasing the equity. The edge of bonds on equity is that if the company goes bankrupt the bond holder will be paid before shareholder on the other hand the profitability of the company doesn't benefit much to the bond holder as a bond holder will only get principal plus interest. Hence the ownership of bonds involves low risk as compare to the ownership of stocks, but this comes at the cost of a lower return.
Corporate bonds: Corporations can raise funds by issuing corporate bonds. A Corporate Bond is a long term instrument yielding interest twice each year until the date of maturity. Convertible bonds can be converted into equity shares before the maturity. The corporations offer the convertibility feature with the bonds in order to attract investors. ...
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