Types of Instruments and Securities for Investment

Business Finance project

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................3
INTRODUCTION...........................................................................................................................4
ANALYSIS AND DISCUSSION...................................................................................................4
Difference between return on debt securities and equity securities............................................4
Yield change through time but the coupon rate remains same....................................................5
Types of risk and how it is affected by increase in the number of shares in the portfolio..........5
Capital Asset Pricing Model (CAPM) to price risky securities...................................................6
Clients Investments......................................................................................................................7
Investment decision.....................................................................................................................8
Determining the internal rate of return........................................................................................9
Investing into bonds...................................................................................................................11
CONCLUSION AND RECOMMENDATION............................................................................12
REFERENCES..............................................................................................................................14

EXECUTIVE SUMMARY
This report provides an insight on the various types of instruments and securities which are
being available for the investment purpose. This involves identifying the risk associated with
different instruments, methods for valuation of eth same, impact of fluctuation in the market over
the value of investment. It includes the mathematical calculation pertaining security valuation.

INTRODUCTION
This report is based on providing information along with certain calculations in in respect
to the various forms of investment option available for the purpose of financing business. There
are certain limitation pertaining to the report which are:
 The financial position of client is not available.
 The client is having only intermediate level of financial knowledge.
 No information in respect to how many of these investments the client can purchase or
invest into.
This report provides a clear insight into the various aspects of the investment in both
theoretical and the mathematical calculations.
ANALYSIS AND DISCUSSION
Difference between return on debt securities and equity securities
Both the forms of investment provide a good return but the they are different from each
other in terms of return. In case of debt securities which involves bonds, mortgages and so forth,
includes the return in terms of fixed percentage or the fixed amount in relation to interest. While
the equity investment which involves stocks comes along with a claim on the income of the
company. The debt instrument is less risky in comparison with the equity instrument but it offers
lower return and is consistent in nature (Cheung and et.al.,2017). It is less volatile as compared
to the equity securities. with less highs and lows than the securities exchange. The security and
loan market generally encounter less value changes, regardless, than stocks. Likewise, at the time
of liquidation the bondholders or the debt holders are paid first. Mortgage ventures, as other
obligation instruments, accompanied with the interest costs and are backed up by real estate
security.
On the other hand, in the equity investment, fortune can be made or lost. Any financial
exchange can be unstable, with the fast changing value of the stocks. Regularly, these wide value
swings are not founded on the strength of the association backing them up however is because of
political, social or legislative issues in the nation of origin of the organization. Equity securities
are an exemplary case of taking on higher danger of misfortune as a byproduct of possibly higher