MARKET 1 Lecture Notes - Lecture 18: Unsecured Debt, Uptodate, Investopedia
Document Summary
Chapter 2 asset classes and financial instruments. Step 1 deciding how much money to allocate to broad classes of assets = assets allocation. Step 2 within each class, the investor selects specific assets from a detailed menu = security selection. Financial markets= are segmented into money markets and capital markets. Money market instruments= short-term, marketable, liquid, low-risk debt securities = cash equivalents = cash; trade in large dominations, so are out of reach of individual investors except for money market mutual funds. Capital market instruments= long-term, riskier securities and more diverse including three segments: longer-term debt markets, equity markets and derivative markets in which options and futures trade: the money market. Investors buy the bills at a discount from the stated maturity value. Tax advantage: the income earned on t-bills is taxable at the federal level, but exempt from state and local taxes. It means that the bill"s discount from its maturity, or face value is annualized based on a.
