Financial instruments may be divided into two types: cash instruments and derivative instruments . Financial instruments may also be divided according to an asset class, which depends on whether they are debt-based or equity-based. Foreign exchange instruments comprise a third, unique type of financial instrument.
What are basic financial instruments?
Basic financial instruments are defined as one of the following: cash . a debt instrument (such as accounts receivable and payable) commitment to receive a loan that satisfy certain criteria. investments in non-convertible preference shares, and non puttable ordinary shares.
Which of the following is a financial instrument?
Most financial instruments fall into one or more of the following five categories: money market instruments , debt securities, equity securities, derivative instruments, and foreign exchange instruments.
What are the best financial instruments?
- Fixed Deposit: FDs provide assured returns at fixed intervals. ...
- Mutual Funds: Your funds are invested in stocks and equities through a mutual fund manager. ...
- Stocks Investment: This instrument for investment is for investors with high-risk appetite.
What are various financial instruments?
- Cash Instruments.
- Derivative Instruments.
- Debt-Based Financial Instruments.
- Equity-Based Financial Instruments.
What are the three types of financial instruments?
There are typically three types of financial instruments: cash instruments, derivative instruments, and foreign exchange instruments .
How many types of financial services are there?
Individual Banking (checking accounts, savings accounts, debit/credit cards, etc.) Business Banking (merchant services, checking accounts and savings accounts for businesses, treasury services, etc.) Loans (business loans, personal loans, home loans, automobile loans, working-capital loans, etc.)
Is gold a financial instrument?
Is monetary gold a financial instrument (like cash)? No. Similar to gold bullion, monetary gold is not a financial instrument as there is no contractual right to receive cash or another financial asset inherent in the item.
Is debt a financial instrument?
Any type of instrument primarily classified as debt can be considered a debt instrument. ... Debt instruments provide capital to an entity that promises to repay the capital over time. Credit cards, credit lines, loans, and bonds can all be types of debt instruments.
Is a loan a financial instrument?
Financial instruments are monetary contracts between parties . ... They can be cash (currency), evidence of an ownership interest in an entity or a contractual right to receive or deliver in the form of currency (forex); debt (bonds, loans); equity (shares); or derivatives (options, futures, forwards).
What is the difference between financial assets and financial instruments?
Financial instruments refer to a contract that generates a financial asset to one of the parties involved, and an equity instrument or financial liability to the other entity. ... Financial assets can be categorized as either current or non-current assets on a company’s balance sheet.
What is the importance of financial instrument?
Financial Instruments are intangible assets, which are expected to provide future benefits in the form of a claim to future cash . It is a tradable asset representing a legal agreement or a contractual right to evidence monetary value / ownership interest of an entity.
Which financial instrument is the most liquid?
1. Cash , bank accounts, and CDs: Cash is the most liquid asset there is.
How can I double my money in 5 years?
Let’s apply Thumb rule in a reverse way, if you wish to double your money say in 5 years, then you will have to invest money at the rate of 72/5 = 14.40% p.a. to achieve your target. This means you have to invest money in those financial products that will give you a return at 14.40% per annum.
What are the 6 types of mutual funds?
- Money Market Funds. Money market funds invest in short-term fixed-income securities. ...
- Fixed Income Funds. Fixed income funds buy investments that pay a fixed rate of return. ...
- Equity Funds. Equity funds invest in stocks. ...
- Balanced Funds. ...
- Index Funds. ...
- Specialty Funds.
What is the safest investment with the highest return?
- Investment #1: High-Yield Savings Account.
- Investment #2: Certificates of Deposit (CDs)
- Investment #3: High-Yield Money Market Accounts.
- Investment #4: Treasury Securities.
- Investment #5: Government Bond Funds.
- Investment #6: Municipal Bond Funds.
