1. Real Assets:
Real assets are tangible assets that have physical characteristics. For instance,
land, house,
Equipment, car, wheat, fruits, cotton, computers, etc., are different kinds of real
assets.
2. Securities:
Security, also known as a financial asset, is a piece of paper representing a claim
on an asset.
Securities can be classified into two categories.
3. • Direct Securities: Direct securities include stocks and bonds. While
valuing
Direct securities we take into account the cash flows generated by the
Underlying assets.
Discounted Cash Flow (DCF) technique is often used to determine the value of
a stock or bond.
4. • Indirect Securities: Indirect securities include derivatives, Futures and
Options.
The securities do not generate any cash flow; however, its value depends on the
Value of the underlying asset.
While in this course, direct securities would be discussed at length, the indirect
securities would only be skimmed through in the later chapters.
5. Bonds:
Bonds represent debt. The important features of bonds are given as under.
• Internationally, bonds are the most common way for companies to raise funds.
• A bond is a long-term debt contract (on paper) issued by the borrower (Issuer
of the Bond i.e., accompany that wishes to raise funds) to the lenders
(bondholders or Investors which may include banks, financial institutions, and
private investors).
• Bonds issued by a company are usually shown on the liabilities side of the
Balance Sheet.
• A Bond requires the borrower to pay a pre-determined amount of interest
regularly to the lender (Bondholder). The interest rate or the rate of return on a
bond can be Fixed or Floating. If an Investor purchases a bond which is offering
a rate of 10 % for the life of the bond, the rate would be fixed at 10 percent.
However, if the interest rate on the bond is tied to the market interest rates, the
rate of interest would be floating. The floating rate implies that the interest rate
would fluctuate with any change in the market interest rate.
Types of Bonds:
• Debentures: Unsecured – no asset backing
• Mortgage Bond: Secured by real property i.e. Land, house
• Others: Eurobond, Zeros, Junk, etc.
The details on these different types of bonds would be discussed in later lectures.
Real assets are tangible assets that have physical characteristics. For instance,
land, house,
Equipment, car, wheat, fruits, cotton, computers, etc., are different kinds of real
assets.
2. Securities:
Security, also known as a financial asset, is a piece of paper representing a claim
on an asset.
Securities can be classified into two categories.
3. • Direct Securities: Direct securities include stocks and bonds. While
valuing
Direct securities we take into account the cash flows generated by the
Underlying assets.
Discounted Cash Flow (DCF) technique is often used to determine the value of
a stock or bond.
4. • Indirect Securities: Indirect securities include derivatives, Futures and
Options.
The securities do not generate any cash flow; however, its value depends on the
Value of the underlying asset.
While in this course, direct securities would be discussed at length, the indirect
securities would only be skimmed through in the later chapters.
5. Bonds:
Bonds represent debt. The important features of bonds are given as under.
• Internationally, bonds are the most common way for companies to raise funds.
• A bond is a long-term debt contract (on paper) issued by the borrower (Issuer
of the Bond i.e., accompany that wishes to raise funds) to the lenders
(bondholders or Investors which may include banks, financial institutions, and
private investors).
• Bonds issued by a company are usually shown on the liabilities side of the
Balance Sheet.
• A Bond requires the borrower to pay a pre-determined amount of interest
regularly to the lender (Bondholder). The interest rate or the rate of return on a
bond can be Fixed or Floating. If an Investor purchases a bond which is offering
a rate of 10 % for the life of the bond, the rate would be fixed at 10 percent.
However, if the interest rate on the bond is tied to the market interest rates, the
rate of interest would be floating. The floating rate implies that the interest rate
would fluctuate with any change in the market interest rate.
Types of Bonds:
• Debentures: Unsecured – no asset backing
• Mortgage Bond: Secured by real property i.e. Land, house
• Others: Eurobond, Zeros, Junk, etc.
The details on these different types of bonds would be discussed in later lectures.
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