Invetment bearing Securities & their role in Portfolio Essay

2658 Words Feb 6th, 2014 11 Pages
INvestment & Portfolio Management
Interest Bearing Securities and Their Role in Portfolio Management
Individual Assignment No.1

Nishith Panthi
1/15/2014

Contents
Executive Summary…………………………………………………………………………………………………………………………………3
Introduction…………………………………………………………………………………………………………………………………………….3
Interest bearing Securities……………………………………………………………………………………………………………………….3
Money Market Securities………………………………………………………………………………………………………………………..3
Long Term Securities……………………………………………………………………………………………………………………………….4
Distinguish Between Money Market Securities and Capital Market Securities……………………………………..4-5
Techniques for Valuation of Securities and Other Assets…………………………………………………………………………6
Assets Classes and Portfolio
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Investments made in a capital market usually last longer than a year and can even last up to 25-30 years. Some investments may depend on the life of the company, with the investment ending if the company shuts down. A benefit of this investment is that if need arises, the investor can swiftly cash their investment.

The difference between Money Market and Capital Market is shown in table below:

Money Market
Capital Market
Definition
Is a component of the financial markets where short-term borrowing takes place
Is a component of financial markets where long-term borrowing takes place
Maturity Period
Lasts anywhere from 1 hour to 90 days.
Lasts for more than one year and can also include life-time of a company.
Nature of Credit Instruments
Homogenous. A lot of variety causes problems for investors.
Heterogeneous. A lot of varieties are required.
Purpose of Loan
Short-term credit required for small investments.
Long-term credit required to establish business, expand business or purchase fixed assets.
Credit Instruments
Certificate of deposit, Repurchase agreements, Commercial paper, Eurodollar deposit, Federal funds, Municipal notes, Treasury bills, Money funds, Foreign Exchange Swaps, short-lived mortgage and asset-backed securities.
Stocks, Shares, Debentures, bonds, Securities of the Government
Basic Role
Liquidity adjustment
Putting capital to work
Institutions

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