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NAME: Jimenez, Ross John C. Year-Course-Section: 3-BSMA-A: Instruments

Primary financial instruments trade on major exchanges and derive their value solely from market forces, while derivative instruments derive their value from underlying assets or indexes. Money market instruments involve short-term debt up to one year for liquidity purposes between organizations, while capital market instruments trade long-term stocks and bonds. Equity instruments represent ownership in an asset and allow companies to raise capital without debt by issuing shares, while debt instruments require fixed payments to holders and represent loans made to companies.

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44 views

NAME: Jimenez, Ross John C. Year-Course-Section: 3-BSMA-A: Instruments

Primary financial instruments trade on major exchanges and derive their value solely from market forces, while derivative instruments derive their value from underlying assets or indexes. Money market instruments involve short-term debt up to one year for liquidity purposes between organizations, while capital market instruments trade long-term stocks and bonds. Equity instruments represent ownership in an asset and allow companies to raise capital without debt by issuing shares, while debt instruments require fixed payments to holders and represent loans made to companies.

Uploaded by

Ross John Jimenez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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NAME: Jimenez, Ross John C.

Year-Course-Section: 3-BSMA-A

ESSAY 4

1. Differentiate primary financial instruments and derivative financial instruments.


 Primary financial instruments are common financial assets; they frequently
trade on major exchanges with significant levels of liquidity, and their
market value established by assumptions about their particular features.
Moreover, a primary financial instrument is a financial investment whose
price is determined solely by its market value. On the other hand,
Derivative financial instruments, also known as non-primary financial
instruments, that derive their value on contractually required cash flows
from some other security or index or a financial instrument whose value is
determined or derived by predicted and actual changes in the price of the
underlying asset. Derivatives provide an alternative offering for investors
looking to profit from fluctuations in the market value of primary
instruments.

2. Differentiate money market financial instruments and capital market financial


instruments.
 The money market is a market for trading short-term debt. It is a
continuous flow of currency between governments, businesses, banks,
and financial organizations, borrowing and lending for as little as overnight
and as long as a year.
 The capital market includes both stock and bond trading. Financial
institutions, professional brokers, and ordinary investors purchase these
long-term investments.
 A money market is a type of financial market in which short-term loans can
be provided. This market comprises assets that deal with short-term
borrowing, lending, purchasing, and selling. A capital market is a
component of a financial market that allows for the long-term trading of
debt and equity-backed assets.

3. Differentiate debt-based financial instruments and equity-based financial


instruments.
 Equity-based financial instruments represent ownership of an asset while
the Debt-based financial instruments represent a loan made by an
investor to the owner of the asset.
 Equity instruments allow a company to raise money without incurring debt,
and they have used the holders to give money in exchange for a portion of
the company. It funds raised by the company by issuing shares knows as
Equity. While Debt instruments are assets that require a fixed payment to
the holder, they are mortgages and government bonds. It funds owed by
the company towards another party knows as Debt.
 Equity instruments are the types of investment in Shares and Stocks.
While Debt instruments are the types of investment in Term loans,
Debentures, Bonds, etc.

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