2. Indirect Transfer through Investment Bankers
Investment banker acts as middleman and facilitates
issuance of securities by reselling the securities to savers
CONT’D
3. Indirect Transfer through financial intermediary
Bank or mutual fund obtains funds from savers and uses the
money to lend or purchase securities
CONT’D
EQUITY
Represents the portion of ownership in the assets of company.
Equity is the residual(at last) interest (dividend) in the assets of the
entity after deducting all the liabilities.
Examples: Ordinary Share Capital, Retained Earnings
DEBT
When a firm raises money for working capital or capital
expenditures by selling bonds, bills, or notes to individual
and/or institutional investors.
For example : Bonds
HYBRID
An investment product that combines the attributes of an
equity security with a debt security.
Examples of hybrid instruments are preferred stocks.
Also called Hybrid Financing Instruments
HYBRID CONT.…
oPreferred Shares have two types;
1) Redeemable Preferred Shares
• No voting rights, have maturity (just like bonds),fix
dividends
2) Irredeemable Preferred Shares
• Have voting rights, no maturity, fixed dividends
Money Market:
Financial assets with maturity one or less then one year.
Capital Market:
Financial assets with maturity more then one year.
MATURITY
Debt Market
Financial assets with fixed claim
Equity Market
Financial assets having residual claim
CLAIM
Primary Market
Financial markets in which financial assets first time offer for
sale.
Secondary Market
Financial markets in which share are offer for sale ones they
are issued.
ISSUE
Exchange Market:
Financial markets that operates from a central location.
Over The Counter Market:
Financial markets which does not operates from a specific
central locations, transactions are made via
telephones, computers etc.
STRUCTURE
Depositary Institutions:
Accepts deposits from individuals and institution and make loans.
Contractual Savings Institutions:
Acquire funds at periodic intervals on a contractual basis.
Investment Intermediaries:
Raise funds by issuing shares, bonds and others financial
instruments.
TYPES OF FINANCIAL
INTERMEDIARIES
Commercial Banks:
Raise funds by issuing checkable deposits, saving deposits and time deposits then make commercial, consumer and mortgage loans.
Savings And Loan Associations
Obtain funds from deposits and make mortgage loans for residential housings.
Credit Unions:
Created for and by its members who are depositors, borrowers, & shareholders.
DEPOSITARY INSTITUTIONS
Life Insurance Companies:
Share financial risk of untimely death of policyholder against
premiums and invest funds in bonds, shares and mortgage.
Fire And Casualty Insurance Companies:
Insure against loss by fire, theft and accidents, risk of loss
funds, liquid investment.
Pension And Government Retirement Funds:
Funds acquired by contribution of employers and
employees, invest in stocks & bonds.
CONTRACTUAL SAVINGS INSTITUTIONS
Finance Companies:
Raise funds by selling commercial papers, shares, bonds and lend funds to consumers.
Mutual Funds:
Acquire funds from selling shares and use to purchase diversified portfolios of stocks and bonds.
Money Market Mutual Funds:
Acquire funds by issuing shares and invest in money market.
Investment Banks:
Helps corporation to issue securities, advices, underwrites.
INVESTMENT INTERMEDIARIES
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