1. Definition: financial assets - An asset that derives value because of a contractual claim. Definition: real/physical assets - An asset that has physical, tangible worth, Like land, property, a car, a machine, equipment, etc. Unlike land and property--which are tangible, physical assets--financial assets do not necessarily have physical worth. Their physical worth is merely the value of the paper on which they are printed. An asset is…

2. A asset is… Financial assets: Real assets: No physical worth, simply a document Examples: land, property, a car, a machine, equipment, etc. Examples: A stock, A bond, Bank account, etc

3. A financial asset is… 1. Financial asset: 2. Physical asset: No physical worth, simply a document These have physical worth.

4. Definition: A financial asset - A bond is legal document (piece of paper). On this paper a contract is Described. It’s a debt instrument that a government or a company issues to raise money. Basically it is a contract between a government or a company—who is acting as the borrower— and investors like you—who are acting as the lender. Financial asset 1: Bonds

5. When you buy a bond, you are lending money to the government or a company which issued the bond, and in return, the government or company agrees to pay your money back, with interest, at some point in the future. You are the creditor, and the other party is the borrower. The bond document states: 1 – the interest you will be paid for the loan 2 – the life of the bond (the date of maturity, e.g. 6 months) Financial asset 1: Bonds

6. For example: A bond may have a life of 2 years and a return of 7% (Called a coupon rate): January 1:Regular interest dateBond MATURITY DATE. You pay $100 You get $7 You get $7 (face value of bond)Regular interestRegular interest You get $100 (face value) Bond maturity Financial asset 1: Bonds Jan 1, 2014Jan 1, 2015Jan 1, 2016 Invest: $100 Return: $7 Return: $107

7. Definition: A Loan- A loan is legally binding agreement Between two parties. Stipulating the amount of the loan The interest rate And the life of the loan And the amount and time of The repayments It’s a debt instrument that is used by individuals, government and companies in order to purchase goods and services. Examples: Car loan, home loan, personal load, business loan, government foreign debt, etc. Financial asset 2: Loan