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Securities Assignment

The document is a student's assignment responses about their personal investment choices and the differences between capital and money markets. For their personal investment, the student prefers low-risk cash and cash equivalents because they value consistency, security, and stability over returns. Cash and cash equivalents protect against market volatility and ensure easy access to funds. The student also finds cash and cash equivalents simple to understand. Between capital and money markets, the student explains that the money market involves short term (under 1 year) lending, is informal but liquid, and has minimal returns, while the capital market includes longer term lending and borrowing, is more formal with less liquidity and greater risk, and provides higher potential returns due to longer investment periods.

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46 views2 pages

Securities Assignment

The document is a student's assignment responses about their personal investment choices and the differences between capital and money markets. For their personal investment, the student prefers low-risk cash and cash equivalents because they value consistency, security, and stability over returns. Cash and cash equivalents protect against market volatility and ensure easy access to funds. The student also finds cash and cash equivalents simple to understand. Between capital and money markets, the student explains that the money market involves short term (under 1 year) lending, is informal but liquid, and has minimal returns, while the capital market includes longer term lending and borrowing, is more formal with less liquidity and greater risk, and provides higher potential returns due to longer investment periods.

Uploaded by

tacangbadette
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Bernadette U.

Tacang March 13, 2024


ECFM3 (M-W 9:00am-10:30am)

Activity 1

My Personal Choice of Investment Vehicle

As a conservative investor, I've always prioritized consistency and security in my investment


decisions. The definition of conservative investment is an investment strategy that ranks capital
preservation over capital growth or market returns. Protecting against market swings and
ensuring stability are the main goals of conservative investing. That is why cash and cash
equivalents have proven to be the finest investment vehicle for me because they are considered
low-risk investments and are often used as a way to preserve capital or generate income.

My preference for cash and cash equivalents stems mostly from their low risk. The value of
cash and cash equivalents does not change over time, in contrast to other investment options
like stocks or bonds, which can have substantial fluctuations. I've been able to protect my
capital and not worry about losing it during market downturns thanks to this constancy. They are
also the most liquid assets, which means that they may be quickly turned into cash in case of
emergencies or unforeseen costs. This has been a helpful flexibility, especially in the face of
unforeseen costs or opportunities that call for quick access to capital.

The ease of use of cash and cash equivalents is something else I value. Cash equivalents,
like money market funds or short-term certificates of deposit, are easy to comprehend and
manage in contrast to complex financial vehicles that need extensive research and oversight.
This clarity satisfies my need for an uncomplicated investing strategy and gives me the
confidence to concentrate on other aspects of my financial planning.

One of the safest asset classes is cash and cash equivalents. Cash and cash equivalents
are backed by the full faith and credit of the government or financial institution that issued them,
in contrast to stocks and bonds, which are vulnerable to market volatility and credit risk. This
implies that even in unpredictable economic times, I may have faith in the security of my money.

In summary, my investing strategy and values are reflected in my utilization of cash and cash
equivalents. They might not provide the highest returns when compared to riskier investments,
but they do offer stability, security, liquidity, and simplicity—all crucial elements for someone like
me who values worry-free investing and wealth preservation.
Activity 2

In 200 words, explain the difference between Capital Market and Money Market.

The portion of the financial market known as the money market is where short-term loans
and borrowing up to one year are made. Promissory notes, bills of exchange, commercial paper,
T bills, call money, etc. are among the things it typically deals in. Financial banks, the central
bank, commercial banks, financial firms, chit funds, etc. are all part of the money market. Money
markets are informal but also liquid in terms of overall market liquidity. Financial instruments
often have a one-year maturity. There is no risk involved because the market is liquid and the
maturity is less than a year. The money markets improve the economy's financial liquidity. In
money markets, returns are typically minimal.

The capital market is a segment of the financial market where lending and borrowing take
place over the medium and long term. The capital market deals with equity shares, debentures,
bonds, preference shares, and other securities. It includes stockbrokers, mutual funds,
underwriters, private investors, commercial banks, stock exchanges, and insurance companies.
Capital markets are more formal, and they are less liquid than other markets. Capital market
instruments have a longer maturity period and no set time range. Because of the less liquid
nature and extended maturity, the risk is rather significant.The capital market stabilizes the
economy through long-term savings. Capital market returns are greater due to the longer term.

To summarize, both are components of the financial markets. The primary goal of the
financial markets is to route funds and make profits. Financial markets stabilize the money
supply through the lending borrowing mechanism, which means that lenders provide surplus
cash to borrowers.

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