2016/9/8 Types of Assets Types of Assets Financial Assets How are financial assets created Stocks: common stocks, preferred stocks Why do people create financial assets? Bonds: government bonds, corporate bonds, municipal What's the sum of the worlds financial assets? What's the sum of china's financial assets Futures and options Financial assets are intangible; but intangible assets an also be real assets Role of financial Assets Role of financial Assets Insfer funds from surplus units to deficit units ansfer funds from surplus units to deficit units. Example 1: You have graduated from college for 3 Example 2: In your late 40s, you have repaid all years and the salary is just satisfying. You really your mortgage and your income is mor han want to buy a small apartment near your company enough to raise the family. what can you do with but your saving can only cover 30% of it. What can the surplus money? you do now? Role of financial Assets Role of financial Assets ansfer funds from surplus units to deficit units Transfer funds so as to redistribute unavoidable risk Example 3: You retire at age 65. Since you don't associated with cash flows generated from both work, you have no salary. However, you can tangible and intangible assets. support your own living with your pension and Example 4: You and your cousin are considering your saving. personal investments in the security market. You Who contributes to your pension and your saving? prefer safe return and invest on government And how bonds, while he is apparently more aggressive and vests in the stock market with leverage O2016/9/8 3 Types of Assets • Financial Assets – Claims on real assets – Stocks: common stocks, preferred stocks – Bonds: government bonds, corporate bonds, municipal bonds – Foreign currencies – Insurance policies, certificate of deposit, bank loans – Futures and options • Financial assets are intangible; but intangible assets can also be real assets! 0-13 Types of Assets • How are financial assets created? • Why do people create financial assets? • What’s the sum of the world’s financial assets? • What’s the sum of China’s financial assets? 0-14 Role of Financial Assets • Transfer funds from surplus units to deficit units. – Example 1:  You have graduated from college for 3 years and the salary is just satisfying. You really want to buy a small apartment near your company, but your saving can only cover 30% of it. What can you do now? 0-15 Role of Financial Assets • Transfer funds from surplus units to deficit units. – Example 2:  In your late 40s, you have repaid all your mortgage and your income is more than enough to raise the family.  What can you do with the surplus money? 0-16 Role of Financial Assets • Transfer funds from surplus units to deficit units. – Example 3:  You retire at age 65.  Since you don’t work, you have no salary.  However,  you can support your own living with your  pension and your saving. – Who contributes to your pension and your saving? – And how? 0-17 Role of Financial Assets • Transfer funds so as to redistribute unavoidable risk associated with cash flows generated from both tangible and intangible assets. – Example 4: You and your cousin are considering personal investments in the security market. You prefer safe return and invest on government bonds, while he is apparently more aggressive and invests in the stock market with leverage. – Whose investment is better? 0-18