Investment Fundamentals Essay

1830 Words Feb 19th, 2012 8 Pages
Running head: Investment Fundamentals

Investment Fundamentals
American InterContinental University

Abstract This paper will calculate the returns on five investments to illustrate how they work. It will also discuss the different types of investments a person can make, along with the differences between the various types of bonds. Furthermore it will state what bond ratings indicate, and the two major agencies that are in charge of assigning these ratings

Introduction As stated by Gitman, Joehnk, & Smart (2011, p. 3) “Any asset into which funds can be placed with the expectation that it will generate positive income and/or preserve or increase its value.” A dollar in hand today is worth more than a dollar to
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As stated by Wisegeek (2011, p. 1) “A derivative security, also known as a derivative stock, is a financial instrument whose price is dependent on one or more underlying financial assets. Derivative security is no more than an agreement between two contracted parties to buy or sell an asset at a fixed price on or before a date of expiration.” This allows investors to engage in speculation and risk management. Derivative securities consist of two features, options and futures. The options feature allows for investors to sell or buy securities at a specific price and period, futures are an obligation that instructs the seller of the futures to contract with the buyer with the delivery of the securities at the set terms and conditions. Other popular investments are real estate and tangibles. Real estate consists of investments in real property, such as land, residential homes or tangible personal property. The potential return of real estate investment is in the form of rental income, tax write off and capital gains. Tangible investments are personal property that includes gold, artwork, antiques and other high value items. Investors receive the return on this type of investment when value increases. Bonds
Bonds are debt obligations with long term maturities issued by government or a corporation. The borrower

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