Enrichment Activity 3.

Name: Vitero, Ralph Eugene

Date: 9/1/2021
Financial Instruments and Markets
Strand & Section: ABM-M12B
Teacher: Mr. Nilo J. Barcelona

I. Discuss the following statement below. Give your personal view or understanding.

1. Differentiate financial intermediaries from depository institutions.

- Financial intermediaries raise and accumulate money from investors and officer the
accumulated money to individuals or corporate entities in need of financial
assistance.
- Depository institutions are financial that accept deposits savings, current, and time
deposits. From individuals and corporate entities, extend loans to borrowers, transfer
funds. And manage funds for investment purposes.

2. What is a financial market and describe the primary activities happening in the market?

- Financial market refers to the place where the selling-buying activity occurs to trade
equity securities such as bonds and stocks, currencies, derivative securities, notes,
and mortgages.
- Capital market
Money market
Primary market
Secondary market
Public market

3. Explain financial instruments.

- It is the third element of the financial system at the regional or national level. Without
it, financial institutions and financial markets can hardly exist. The financial
institutions and financial markets carry out their activities through the financial
instruments.

4. Give some examples of financial instruments.

- Cash – on the part of the holder, cash is a financial asset.

- Check - it is a financial asset of the payee, but is considered and a financial liability
of the drawer or issuer.
- Loan – it is a financial asset of the lender or creditor and a financial liability of the
borrower or the debtor.
- Bond – It is a financial asset of the holder or investor but considered a financial
liability of the issuing company.
- Stock – it is a financial asset of the investor or shareholder but an equity of the
issuing company.
5. Describe a bond.

- A bond is a financial instrument that represents a contractual debt of the party

issuing the bond. The issuing party may either be a private business entity or a
government. This type of financial instrument is evidenced by a certificate called
bond indenture.

6. Discuss briefly the following types of bonds:

a. Term bond
- - It is a bond that has a single maturity date. The bond can be a single lone bond, or
can be composed of several bonds with the same maturity date.
b. Serial bond
- Is a kind of bond that has a series of several maturity dates instead of single maturity
date.
c. Secured bond
- It is a type of bond that is secured by the issuing company. The security is issued in
the form of real property which serves as collateral in the even of default on the part
of the bond issuer.
d. Debenture bond
- a bond is considered debenture bond when it is not supported by any collateral or
security as assurance in time of non- payment or default.
e. Convertible bond
- A bond is a debt security. As such, a bondholder is also referred to an a creditor
f. Callable bond
- Bond have maturity dates indicated on the face of the indenture

7. Define a shares of stocks.

- Common stock or ordinary shares

- Preferred stock or preference shares

8. Differentiate common stock from preference stock.

- The common stock or ordinary share is a financial instrument whose holders do nit
have preferences over each other. The common stockholders have the same rights
and privileges in terms of dividend or asset distribution with other stockholders.
- The preference on the distribution of profit means that preference stockholders are
paid first of the dividends accruing to them. It indicates that ordinary shareholders
can only share the dividends once all the dividend claims of the preference
shareholders are fully settled.