1. The major classes of securities are fixed-income securities which are often bonds these
have the lowest risk and are considered debt payments. There are also equity securities
represent ownership of firms and their assets. The third type of security are derivatives
which are such instruments as options, futures and swaps.
2. -.05/2.5 = -0.2% capital return. 0.30/2.5 = 0.12 = 0.12 + (-0.02) = 10%
3. Money markets are trading in securities with a maturity of less than one year is done,
Capital markets allow for the trading of longer-term instruments.
4. Real assets include such things as plant and equipment, houses and human capital.
They allow society to produce goods and services which add to the well-being of its
members. Financial assets are certificates or book entries representing legal entitlement
to ownership or promised payments. Securities consist of stocks, and bonds that are
traded in financial markets.
Stock Ownership Bond Ownership
Pros: Ownership & Control (Voting Right) - Pros: receive interest payments
even if things go bad.
- Only initial investment is lost at
most and not their personal wealth -