Investment

Investment- We are redirecting resources, that you would consume now for the future.


Financial Asset- claims on property and income of the borrower

Financial Intermediaries- institution that channels funds from savers to borrowers.

Interest in relationship savers, saver is me, and institution is a bank, the bank invests.

3 Purposes for Financial Intermediaries
1. Share risk
-- Diversification- spreading out investment to reduce risk

2. Providing Information
--Stock-broker to advise you what to do to see

3. Liquidity
--Easily to convert to cash
--Returns- the money and inverses above and beyond the sum of money that was intentionally invested.

The higher the risk, the higher the investment bond.

Bonds
3 Components of a Bond

1. Coupon rate
2. Maturity
3. Par Value

Bonds are Loans or IOUs that represent debt that the Gov't or a cooperation must repay to an invester

-Bonds are generally low risk investments

1. Coupon Rate

- the interest rate that a bond issuer will pay to a bond holder

2. Maturity

- the time at which payment to a bond holder is due

3. Par Value

- the amount that an investor pays to purchase a bond and that will be re payed to an investor at maturity

Yield- Annual rate of return on a bond of the bond were held to maturity 

Bond you LOAN

Stocks you OWN