master tier

Cards (44)

  • Asset
    A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity
  • Types of assets
    • Tangible assets
    • Intangible assets
  • Tangible assets

    Assets that has physical properties and can be easily seen, touched or perceived by five senses. Value of tangible assets are based on its physical properties
  • Financial instruments are the main vehicle used for transactions in the financial markets
  • Cash equivalents
    Securities that are maturing 90 days or less
  • Investments
    Securities that are maturing more than 90 days
  • Parties involved in financial instruments
    • Issuer
    • Investor
  • Investor
    The party that receives and owns the financial instrument and bears the right to receive payments to be made by the issuer. The investor usually have surplus funds that are not earning anything and are willing to bear some risk to earn something from their surplus funds
  • Fundamental characteristics of money markets

    • Usually sold in large denominations
    • Low default risk
    • Mature in one year or less from the original issue date. Most money market instruments mature in less than 4 months
  • Participants in the money market
    • Bureau of Treasury
    • Commercial Banks
    • Private individuals
    • Commercial Non-Financial Institutions
    • Investment companies
    • Finance/Commercial leasing companies
    • Insurance companies
    • Pension funds
  • Treasury Bills
    Short-term obligations issued by the Philippine government to cover current government budget shortfalls (deficits) and to refinance maturing government debt
    1. bills are sold on a discount basis. Rather than directly paying interest on T-bills (coupon rate is 0), the government issues T-bills at a discount from their par (or face) value
  • The return on T-bills comes from the difference between the purchase price paid for the T-bill and the face value received at maturity
  • Other money market instruments
    • Repurchase Agreements
    • Commercial Paper
    • Negotiable Certificates of Deposit
    • Banker's Acceptances
  • Repurchase Agreements
    Agreements involving the sale of securities by one party to another with a promise to repurchase the securities at a specified date and price
  • Commercial Paper
    Short-term unsecured promissory notes issued by a company to raise short-term cash
  • Valuation of money market securities is important to determine at what amount an investor is willing to pay in exchange of a security
  • Money market securities can be valued using the present value approach
  • The interest rate used in the valuation shall reflect the required return from the instrument based on the investor's perceived risk
  • Debt instrument
    A paper or electronic obligation that enables the issuing party to raise funds by promising to repay a lender in accordance with terms of a contract
  • Types of debt instruments
    • Notes
    • Bonds
    • Debentures
    • Certificates
    • Mortgages
    • Leases
    • Other agreements between a lender and a borrower
  • Long-term debt instruments
    • Mortgage payments
    • Car loans
  • Debt security
    A debt instrument, such as government bond, corporate bond, certificate of deposit (CD), municipal bond, that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount borrowed), interest rate, and maturity and renewal date
  • Types of debt securities
    • Money market securities
    • Capital market debt securities
  • Capital market debt securities
    Debt securities with maturities of longer than one year. Examples are notes, bonds, and mortgage-backed securities
  • Debt securities
    Are negotiable and tradable debt instruments which carry value on them
  • Not all financial instruments are securities
    A credit card bill and payday loans for example are just debt instrument but not debt securities
  • Government bonds
    Are debt instruments and also debt securities since they carry value that is negotiable and tradable in the financial market
  • Debt market or debt securities market
    Also known as bond market, it is a financial market in which the participants are provided with the issuance and trading of debt securities
  • The bond market primarily includes government-issued securities and corporate debt securities, facilitating the transfer of capital from savers to the issuers or organizations requiring capital for government projects, business expansions and ongoing operations
  • The goal of the bond market is to provide long-term financial aid and funding for public and private projects and expenditures
  • Types of bond markets
    • Corporate Bond
    • Government Bonds
    • Municipal Bonds
    • Mortgage Bonds
    • Asset-backed bonds
  • Corporate Bond
    Corporations provide corporate bonds to raise money for different reasons, such as financing ongoing operations or expanding businesses
  • Government Bonds
    National governments issue government bonds and entice buyers by providing the face value on the agreed maturity date with periodic interest payments
  • Municipal Bonds
    Local governments and their agencies, states, cities, specialpurpose districts, public utility districts, school districts, publicly owned airports and seaports, and other government-owned entities issue municipal bonds to fund their projects
  • Mortgage Bonds
    Pooled mortgages on real estate properties provide mortgage bonds. Mortgage bonds are locked in by the pledge of particular assets. They pay monthly, quarterly or semiannual interest
  • Asset-backed bonds
    Also known as asset-backed security (ABS) is a financial security collaterized by a pool of assets such as loans, leases, credit card debt, royalties or receivables
  • Characteristics of a regular bond
    • Coupon rate
    • Maturity date
    • Current or Market Price
  • Coupon rate
    The fixed return that an investor earns periodically until the bond matures
  • Maturity date
    The date when the bond issuer repays the investor the full face value of the bond