Order Instructions
FIN 340 Module One Journal Guidelines and Rubric
Overview
This journal activity is private between you and the instructor. In this journal assignment, your objective is to describe a few of the most common types of potential investment vehicles and understand the difference between the primary vehicles and derivative vehicles. Think about the following questions as you create your journal assignment:
What does this investment represent?
How does each investment generate income or cash flows?
What can go wrong with this investment?
How can you buy and sell the investment?
Prompt
Specifically, the following critical elements must be addressed:
Define short-term investments, stocks, and fixed income investments.
Discuss the risks of short-term investments, stocks, and fixed income investments.
Relate your answers to the following types of investments:
Short-Term Investments
Money Market Mutual Funds
United States Treasury Bills
Stock
Preferred
Common
Fixed Income
Bonds
Other
Exchange-Traded Funds (ETF)
Mutual Funds
What to Submit
Your journal assignment should be three to five paragraphs in length and address all of the critical elements. It should also cite at least two sources using APA format. Consider utilizing the required readings, as well as recent news articles. Submit the journal assignment as a Word document.
SAMPLE ANSWER
Short-term Investments:
Short-term investments are those investments that have a maturity period of less than one year. They are often considered to be liquid assets that can be easily converted into cash. The main types of short-term investments include money market mutual funds, United States Treasury bills, and stocks.
Money Market Mutual Funds:
Money market mutual funds are a type of short-term investment that invests in highly liquid, low-risk securities such as government securities and certificates of deposit. The risks associated with money market mutual funds are relatively low, but there is still a risk of losing money if interest rates rise or if the issuer defaults.
United States Treasury Bills:
United States Treasury bills, also known as T-bills, are short-term debt securities issued by the US government. They are considered to be one of the safest investments because they are backed by the full faith and credit of the US government. The main risk associated with T-bills is inflation, which can reduce the purchasing power of the investment.
Stocks:
Stocks represent ownership in a company, and they are a long-term investment that can provide high returns but also carry high risks. Preferred stocks provide a fixed dividend and are less volatile than common stocks, which represent ownership in the company with no fixed dividend. The risks associated with stocks include market volatility, company performance, and economic factors.
Fixed Income Investments:
Fixed income investments are investments that provide a fixed rate of return over a specific period. The main types of fixed income investments include bonds, exchange-traded funds (ETFs), and mutual funds.
Bonds:
Bonds are debt securities that are issued by companies or governments to raise capital. The risks associated with bonds include credit risk, which is the risk that the issuer may default on the debt, and interest rate risk, which is the risk that the value of the bond will decrease if interest rates rise.
Exchange-Traded Funds (ETFs):
ETFs are a type of investment that combines the features of stocks and mutual funds. They are traded on stock exchanges like stocks and invest in a basket of securities like mutual funds. The risks associated with ETFs include market volatility and the performance of the underlying securities.
Mutual Funds:
Mutual funds are investment vehicles that pool money from multiple investors to invest in a variety of securities. The risks associated with mutual funds include market volatility and the performance of the underlying securities.
In summary, short-term investments are generally considered to be low-risk investments but still carry some level of risk. Stocks are a long-term investment with high potential returns but also carry high risks, while fixed income investments provide a fixed rate of return over a specific period and carry credit and interest rate risks. It is important for investors to understand the risks associated with each type of investment before making any investment decisions.