Financial Markets and Institutions Essay Example | Topics and Well Written Essays - 1250 words - 2

Financial Markets and Institutions - Essay ExampleAnother option available to an investor is the monetary grocery stores that help to channel money from an individual having surplus funds to an individual who requires the money. By participating in financial markets the investor will get the opportunity to invest in a broad range of securities ranging from telephone lines, coheres, and treasury bills to modern financial operators such as derivatives. Financial markets helps to create wealth by mobilizing personal nest egg of investors and arranging suitable invest opportunity. The process in turn contributes in creation of national wealth by encouraging investments and savings (Madura, 2012, pp.4-7). Overview of Securities Treasury Bills The maturity of T-bills is less than a year and is hence instrument of money market and not capital market. These instruments argon very similar to zero-coupon bonds and hence do not pay interest prior to maturity. The process of issuing T-bi lls is through competitive bidding where they are exchange to investors at discount and at maturity they are redeemed at the face value of the bond. The perceptivity of bond prices in near future provides returns for investment. The maturity of treasury bills varies from 28 days to 364 days and they are sold weekly through single-price auctions. The minimum amount of investment in T-bills has been reduced from $ vitamin C0 to $100 and the maximum purchase amount is $5 million. Bonds Bond can be defined as the financial instrument through an institution borrows money from different investor for definite period of time with a placed interest rate. It can be used by integrated, municipalities and government organisations to fund new projects and for further expansion. have-to doe with rate is also known as coupon rate and interest on bonds can be paid semi annually (every six months) and on the date of maturity principal amount of the bond will be paid to the investor with coupon rate. Bond market is also called as a debt market or credit market which is a financial market where new bonds can be issued and affair on existing bonds can be done. It is a long term financial market which includes corporate bonds, notes, bills US treasury bonds.US bond market is about 44% of global bond market. According to SIFMA (Securities patience and Financial Market Association) current US bonds market increased from March 2012 to 2013 by 2% to just about $100 trillion. Currently the yields of US treasuries are varying from 0.05% to 3.89% for 3 months treasuries to 30 year treasuries (Fabozzi, 2007, p.261). Stocks The seam or capital stock of an incorporated business constitutes the equity stake of its owners. It interprets the residual assets of company which is due to stockholders afterward discharging secured and unsecured debt. The stockholders equity cannot be withdrawn from company as it is detrimental to creditors of company. The stock of a corporation is partit ioned into shares. Additional shares can be authorized by existing shareholders and issued by company. Shares represent a fraction of ownership in business. This ownership of share is documented by issue of stock certificate which a legal document is specifying the amount of share owned by shareholder. Stock in the form of shares can be preferred stock or super C stock. Preferred stock differs from common stock in the way that it does not carry voting rights. It is entitled to a certain take aim of dividend payment