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˜ Financial Markets Functions and classification.

˜ Definition and concept of investment.
˜ Types of investment.
˜ Attributes of investment.
˜ Investment and speculation.
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˜ Orimary Markets: Markets where new securities

are issued.
˜ Secondary Markets: Markets where outstanding
securities are traded.




 
 



 

Functions:
a) Facilitate price discovery.
b) Orovide liquidity.
c) Reduce the cost of transaction.
Classification:
Debt Market Equity Market
Money Market Capital Market
Orimary Market Secondary Market
Cash/Spot Market Forward /Futures Market
Exch Traded Mkt OTC Market
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Investment is a sacrifice of current money or

other resources for future benefits. Related
to saving or deferred consumption.
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£on Marketing FA Equity Shares
Bonds Money Market
Mutual Funds Life Insurance
Real Estate Orecious objects
     

˜ Rate of return:equal to Ann. Inc.+ (End price-Beg. Orice) /Beg. Orice

˜ Risk: Tools to calculate risk are variance( square of deviation of
individual returns from avg returns), deviation, beta ( measure of
volatility of inv. In response to market swings)
˜ Marketability-a) it can be transacted quickly. b) the transaction cost
is low. c) price variation is negligible between two successive txns.
˜ Tax shelter: Initial tax benefits, continual tax benefits, terminal tax
benefits.
˜ Convenience: a) whether inv can be made readily. b) can inv be
looked after easily.
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Investment Speculation

Olanning Horizon Longer Shorter

Risk disposition Moderate risk High risk

Return expectation Moderate High

Basis of decisions Fundamental factors & Relies more on

careful evaluation of hearsay and market
prospects of the psy. believe in pools,
company. churning, runs,
ramping, bear raid.
Leverage Uses his own funds Borrows heavily.


  


˜ Specification of Investment Objectives and

constraints.
˜ Choice of Asset Mix
˜ Formulation of Oortfolio Strategy
˜ Selection of Securities
˜ Oortfolio Execution
˜ Oortfolio Revision
˜ Oerformance Evaluation.