Different Types Of Investments

Submitted By kyjame12
Words: 1058
Pages: 5
Open Document
Jameson Reid
Dr. Gonas
FIN 3460
September 5, 2013

There are many different types of investments a person can make, but it is important to consider or evaluate your investment risk before you invest your money. There are three things that a person should be aware of when it comes to different kinds of investments: if there is any type of collateral and what it is, the desired yield and its source, and what the term of his or her investment is. This essay focuses on seven different types of investments and the characteristics of each. A medium term US Treasury Bond is an investment with five to ten years to maturity. These investments are considered risk free investments because they are guaranteed by the US government. Income earned by Treasury bonds represents interest payments based upon the stated coupon of the bond. The interest and principle are considered risk free, if held to maturity. Because of this, US Treasury Bills, Notes, and Bonds are risk free. An example of a T-note is one with maturity at 30 Sept. 2018, a coupon rate of 1.375%, and YTM at 1.411. Another type of investment is a medium term non-callable Corporate Bond debenture. This bond is non-callable, which means that the issuer cannot demand this investment from the owner before maturity. A debenture is a type of debt instrument that is unsecured, so, there is no collateral on a Corporate bond. The investor’s money is backed by the financial status of the company’s future performance. If they are not able to pay the coupons to investors, the company may be required to generate cash flow from other sources. The sources can include the selling of assets, refinancing of existing debt, or raising of new capital. The higher the risk of the investment, the higher the interest rates will be. There is a Bank of America corporate bond with a 6.001 YTM that reaches maturity at 5 Dec. 2014 A bond that is issued by a government agency is called an Agency bond. Some well know agency bonds are Freddie Mac and Fannie Mae, which are collateralized by residential mortgages. Also paying in coupons, these investments are used by the agencies to purchase residential mortgages that collateralize the mortgage backed securities. The credit rating of agency bonds is very close to that of the US Treasury, however there is credit risk for these investments. An example of a Fannie Mae agency bond is FNMA with a .850 coupon rate, .148 YTM, and reaches maturity at 15 Sept. 2018. A medium term non-callable general obligation Municipal Bond is issued by state and municipal government organizations. Unlike US Treasury bonds, these are not considered risk free and are unsecured. The payment source of these bonds is the tax revenues of that local government. When needed, these government agencies are able to raise revenues through increased tax rates. As a recent example of the risks of these investments, the city of Detroit recently filed bankruptcy, indicating that the city is not able to meet all of its obligations. There is a Clarksville municipal bond with a YTM of 1.915 that matures at 1 June 2019 with a coupon rate of 4.0. Municipal investments are typically considered tax-free for US income taxes, which can increase the yield and the attraction on these investments. Cumulative Preferred Stock is another type of investment that a person can make. Preferred stock typically has a higher dividend rate then normal equity stock. It will also contain other rights provided to the preferred stock owner. These are unsecure investments because, similar to Corporate bonds, their repayment is based upon the company’s future cash flow. As stated earlier, Preferred stocks pay out income in dividends. BAC-PL is an example of preferred stock for Bank of America. Based upon its dividend that was paid on July 30, and its stock price at that time, its annualized dividend yield was 6.62%. An investment in an equity income Common
Show More

Related Documents: Different Types Of Investments

Essay on 1 1

deaths. Obviously, humans like to imitate biology of other species to make lives easier and more convenient than before. One of the famous psychologists, Susan Blackmore, analyzes why humans like to imitate other things, such as animals, memes, in her essay titled “Strange Creatures”. Blackmore suggests that imitation makes humans different from other species. Then, she introduces a related word, meme that anything is passed on by people, a word, a behavior, an idea and so on. Some characteristics of…

Words 795 - Pages 4

chapter 1 essay 1

Tyra Garrett Psy 2012 Prof. Smith February 5, 2015 Essay 1 Chapter 1 The seven major perspectives are biological, behavioral, psychodynamic, humanistic, cognitive, and evolutionary and last sociocultural. They all allow psychologist to understand behavior and mental processes. Biological approach is where phycologist focus on the brain and the nervous system basically the body. The behavioral approach focuses on observing behavior. The psychodynamic approach emphasizes on unconscious thought…

Words 451 - Pages 2

Essay 1

Ian Munroe Savannah State University Essay 1: Job Satisfaction Ian Munroe Dr. Jun Wu MGNT 3300 8 February 2015 Essay 1: Job Satisfaction As a manager it is essential to understand what makes and keeps employees satisfied with their jobs. A stable work environment where employees feel that their work is meaningful and important is vital for an organization to run at maximum efficiency. Researchers have compiled an extensive amount of data that explains the causes of job satisfaction…

Words 1120 - Pages 5

Of The 1% Essay

Jasmine Allen Nov. 4, 2014 ENC 1101 In class essay 1 Of the 1%, by the 1%, for the 1% Stiglitz begins by noting that 25 years ago the richest, 1%, of Americans had 33% of the nations wealth. It took 12% of its yearly income, whereas the corresponding figures today are 40% and almost 25%. He offers reasons to trust that nor will those outcomes for this project of massine upwards redistribution about money. More riches beheld will additionally make increased. The american democracy has become a sham…

Words 498 - Pages 2

Essay 1

“In the beginning, God created the heavens and the earth.” (Genesis 1:1) If you accept this Statement it will open your eyes to the discovery of the God that we truly serve today. The society of the world that we live in today may not understand who God really is. Many fear him because of lack of understanding, some due to their sinful nature, and some who just do not believe he even exist. The God that created all in the beginning is the same God that is alive and being served today all around…

Words 885 - Pages 4

Principles 1 Chapter 1 1 Essay

assignments on-time. Decide this evening what your goal is for this course. Make your goal very specific and devise a plan for achieving that goal. Please be prepared to work and to study REGULARLY. Dr. Ziska Chapter 1 Life: Chemical, Cellular and Evolutionary Foundations CHAPTER 1 OUTLINE/CORE CONCEPTS 1.1 The Scientific Method The scientific method is a deliberate way of asking and answering questions about the natural world. 1.2 Chemical and Physical Principles Life works according to fundamental…

Words 3123 - Pages 13

Essay 1

1.6 Essay Question Exhibit 6 displays four enablers serves as a support for many firms to development of progressive strategies and approaches. It also serves as a support to attain supply chain, purchasing, and organizational objectives. These four pillars also connects with the organization’s requirements and philosophy. Exhibit 1.6 contains 3 sections; Part 1. Business Requirements and Guiding Philosophies Part 2. Four Pillars Part 3 Proative Purchasing and Supply Chain Management Strategies…

Words 2156 - Pages 9

ACC500Sept2014Syllabus 1 1 Essay

all courses at SNHU; excessive absences may result in failure or withdrawal from courses. More than three absences may be excessive. ACC500 Managerial Accounting Course Outline 9/2/14 Managerial Accounting & The Business Organization Chapter 1 Understanding Corporate Annual Reports Chapter 16 9/9/14 Understanding Corporate Annual Reports Chapter 16 Analysis of Financial Statements Chapter 17 p 724 through EOC 9/16/14 Introduction to Cost Behavior & Cost Volume Relationships Chapter…

Words 970 - Pages 4

essay 1 draft 1

Alan Xie Prof Anna Striedter Grammar 28 November 3, 13 Midterm (revision) We lived in a modern-perfect world that the racialism, the discrimination and most of other historical conflicts, which impeded the development of human society, had been solved. Today, people won’t treat you differently from others because of your skin or gender. The society seems becoming more and more ideal. However, nowadays it seems like it is harder for people to get outstanding accomplishment. Cause you were not…

Words 679 - Pages 3

Essay about 1 1

Eng. 1320 lab 1.1 6/17/15 A concept map presents the relationships among a set of connected concepts and ideas. It is a tangible way to display how your mind sees a particular topic. By constructing a concept map, you reflect on what you know and what you don’t know. In a concept map the concepts, usually represented by single words enclosed…

Words 407 - Pages 2