ADMS 3531 Chapter Notes - Chapter 4: Preferred Stock, United States Treasury Security, Current Yield

• School: York University
• Department: Administrative Studies
• Course: ADMS 3531
• Professor: Dale Domian

Document Summary

Financial assets ac be grouped into three broad categories and subdivided into few major subtypes: securities are often called financial instruments". Financial assets are hard to classify because they are hybrids, meaning that they are a combination of the basic types. Interest bearing assets pay interest implicitly and explicitly. The value of these assets depends, on interest rates. Terms like bond" or note" are fixed income securities: you buy 1 million in face amount of a 6%, 2-year bond. The 6% is called the coupon rate, and it tells you that you will receive 6% of the 1 million face value each year, or , in two semiannual. In 2 years, in addition to your final coupon payment, you will receive the 1 million face value. This risk depends on the issuer: depending on the debt issue, illiquidity can be a problem.