Chapter 2 - Asset classes and financial investments. In this chapter, we first describe money market instruments. We then move on to debt and equity securities. We explain the structure of various stock market indexes in this chapter because market benchmark portfolios play an important role in portfolio construction and evaluation. Finally, we survey the derivative security markets for options and futures contracts. | CHAPTER 2 Asset Classes and Financial Investments Major Classes of Financial Assets or Securities Money market Bond market Equity Securities Indexes Derivative markets The Money Market Treasury bills (Tín phiếu) Bid and asked price Certificates of Deposits (Chứng chỉ tiền gởi) Commercial Paper (Thương Phiếu) Bankers Acceptances (Hối phiếu) The Money Market Continued Eurodollars Repurchase Agreements (RPs) and Reverse RPs Brokers’ Calls Federal Funds (TT Liên ngân hàng) LIBOR Market Figure Rates on Money Market Securities Table Major Components of the Money Market Figure Treasury Bill Yields Figure The Spread between 3-month CD and Treasury Bill Rates The Bond Market Treasury Notes and Bonds Inflation-Protected Treasury Bonds Federal Agency Debt International Bonds Municipal Bonds Corporate Bonds Mortgages and Mortgage-Backed Securities Treasury Notes and Bonds Maturities Notes – maturities up to 10 years Bonds – maturities in excess of 10 years 30-year bond Par Value - | CHAPTER 2 Asset Classes and Financial Investments Major Classes of Financial Assets or Securities Money market Bond market Equity Securities Indexes Derivative markets The Money Market Treasury bills (Tín phiếu) Bid and asked price Certificates of Deposits (Chứng chỉ tiền gởi) Commercial Paper (Thương Phiếu) Bankers Acceptances (Hối phiếu) The Money Market Continued Eurodollars Repurchase Agreements (RPs) and Reverse RPs Brokers’ Calls Federal Funds (TT Liên ngân hàng) LIBOR Market Figure Rates on Money Market Securities Table Major Components of the Money Market Figure Treasury Bill Yields Figure The Spread between 3-month CD and Treasury Bill Rates The Bond Market Treasury Notes and Bonds Inflation-Protected Treasury Bonds Federal Agency Debt International Bonds Municipal Bonds Corporate Bonds Mortgages and Mortgage-Backed Securities Treasury Notes and Bonds Maturities Notes – maturities up to 10 years Bonds – maturities in excess of 10 years 30-year bond Par Value - $1,000 Quotes – percentage of par Figure Lisiting of Treasury Issues Federal Agency Debt Major issuers Federal Home Loan Bank Federal National Mortgage Association Government National Mortgage Association Federal Home Loan Mortgage Corporation Municipal Bonds Issued by state and local governments Types General obligation bonds Revenue bonds Industrial revenue bonds Maturities – range up to 30 years Figure Tax-exempt Debt Outstanding Municipal Bond Yields Interest income on municipal bonds is not subject to federal and sometimes not to state and local tax To compare yields on taxable securities a Taxable Equivalent Yield is constructed Table Equivalent Taxable Yields Corresponding to Various Tax-Exempt Yields Figure Ratio of Yields on Tax-Exempt to Taxable Bonds Corporate Bonds Issued by private firms Semi-annual interest payments Subject to larger default risk than government securities Options in corporate bonds Callable Convertible Developed in the 1970s to help .
