Other Markets And Investment Flashcards
(17 cards)
What are the two types of cash deposits?
Instant access and fixed term
Fixed terms usually carry higher interest rates.
Who holds cash deposits?
Banks, building societies, and other financial institutions.
What is a key characteristic of cash deposits?
They are liquid and can be turned into cash quickly.
What are the disadvantages of cash deposits?
- Saving institution may default
- Inflation reduces real value of cash
- Currency risk if investing offshore
What protects UK depositors in cash deposits?
The financial services compensation scheme covers the first £85,000 of deposits per person, per institution.
What are the three main types of crypto assets?
Bitcoin, security tokens, utility tokens.
What are money markets used for?
Markets for cash of short dated negotiable securities, normally with a maturity of up to 1 year.
What are the main types of UK money market instruments?
- Treasury bills
- Certificates of deposit
- Commercial paper
What is a treasury bill?
A non-interest bearing instrument issued at a discount to its value.
How do investors earn a return on a treasury bill?
The return comes on maturity from the difference between the purchase price and the maturity value.
What are the advantages of investing in property?
- Reliable income stream
- Low volatility
- Asset value should increase over time
What are the disadvantages of investing in property?
- Lack of liquidity
- Subject to prolonged downturns
- Risk of having no tenants
What are the most commonly quoted currency pairs?
- USD and JPY
- EURO and USD
What is a spot transaction in foreign exchange?
The rate quoted for immediate exchange of one currency for another.
What is a forward transaction?
Money does not change hands until an agreed future date.
What differentiates future transactions from forward transactions?
Future transactions are traded on derivative exchanges and are standardized.
What is a swap transaction in foreign exchange?
A currency swap where two parties exchange currencies for a period and reverse the transaction later.
