Define financial instruments? what are their characteristics?
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DEFINITION of 'Financial Instrument'Financial instruments are assets that can be traded. They can also be seen as packages of capital that may be traded. Most types of financial instruments provide an efficient flow and transfer of capital all throughoutthe world's investors.
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Financial instruments: They are contracts between business partners or parties.
They can be created, modified and settled.
There are different types of financial instruments. Some of them are,
- Simple bonds.
- Compounds bonds.
- Profit Participative Bonds.
- PEC (Preferred Equity Certificate)
- CPEC (Convertible Preferred Equity Certificate)
Characteristics:
- Marketable
- Secure
- Tax benefit
- Relationship between the issuer and investor
- The nominal value
- Easy to create
- Reliable
- Flexible
- Under law
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