investment alternative with respect to time value of.pptx

7/29/2019 Investment Alternative With Respect To Time Value Of.pptx

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INVESTMENT

ALTERNATIVE WITHRESPECT TO TIMEVALUE OF MONEY

Alka Dhingra


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GROUP MEMBERSName Roll Number

Ganesh Bangar 10B706

Bhaskar Chityala 10B709

Harish Jain 10B722

Pratik Lawana 10B729

Arpita Mayekar 10B731

Suraj Mohite 10B734Vinayak Bandi 10B409

Aakash Choudhary 10B412

Sandeep Chaurasia 10B414

Hiren Rathod 10B461


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INVESTMENT

Investment refers to current commitment of funds for a specified time period to dfuture.

The future benefits derived from an investment are known as returns

Giving loan: with an expectation to get the principal back along with the interest a

Buying gold: with an expectation of appreciation in its value in future

Buying an insurance plan: for various benefits derivable in future &/or in case of a

Buying shares of companies: for dividend &/ or capital appreciation

CURRENT SACRIFICE FUTURE REWARD

As the reward would accrue only in future, it involves risk (of realized return bein

expected)


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OBJECTIVE OF INVESTORS

Maximization of return Minimization of risk

Safety

Income

Growth of Capital

Tax Minimization

Marketability / Liquidity


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INVESTMENT ALTERNATIVES

FINANCIAL ASSETS

Equity shares

Bonds

Preference shares

Non- marketable financial assets

Money market instruments

Mutual funds

Life insurance

REAL ASSETS

Real estate

Precious objects


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EQUITY SHARES Represents ownership capital

- They elect the board of directors and have a right to vote onevery resolution placed before the company

- They enjoy the pre-emptive right which enables them tomaintain their proportional ownership

Risk: residual claim over income Reward: partners in progress The amount of capital that a company can issue as per its

memorandum represents authorized capital The amount offered by the company to the investors is called

issued capital The part of issued capital that is subscribed to by the investors is

called subscribed capital / paid up capital


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EQUITY SHARESPar / Face / Nominal valueof a share is stated in the

memorandum and written on the share scrip

Issue of shares at a value above its par value is calledissue at apremium

Issue of shares at a value below its par value is calledissue at adiscount

The price at which the share currently trades in the market is called

themarket value


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EQUITY SHARES Blue chip shares

Shares of large, well established and financially strong companies with impressive record ofearnings and dividend Growth shares

Shares of companies having fairly strong position in the growing market and having an aboveaverage rate of growth and profitability

Income shares

Shares of companies having fairly stable operations, limited growth opportunities and highdividend payouts

Cyclical shares

Shares of companies performing as per the business cycles Defensive shares

Shares of companies relatively unaffected by the ups and downs in the general economicconditions

Speculative shares

Shares of companies whose prices fluctuate widely because of a lot of speculative tradingbeing done on them


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BONDS

They are long term debt instruments issued for a fixed time period. Bondsare debt securities issued by the government or PSUs.

Debenturesare debt securities issued by private sector companies.

They comprise of periodic interest payments over the life of the instrumprincipal repayment at the time of redemption.

Debt securities issued by the central government , state government and

government agencies are referred to as gilt-edged securities. Callable bondsare the ones that can be called for redemption earlier th

maturity. This right to call is available with the company

Convertible bonds are the ones that can be converted into equity shareseither fully or partly. This option is available with the bond holder.

Coupon rate is the nominal rate of interest fixed and printed on the bonis calculated on the face value and is payable by the company till maturit


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PREFERENCE SHARES Represents a hybrid securitythat has attributes of both eq

and debentures. They carry afixed rate of dividend. However it is payable o

distributable profits.

Dividend on preference shares is generally cumulative. Div

skipped in one year has to be paid subsequently before eq

can be paid.

Only redeemable preference sharescan be issued.


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NON-MARKETABLE SECURITIES

These represent personal transactions between the investoissuer.

Bank deposits- There are various kinds of bank accounts current, sav

fixed deposit- While a deposit in a current account does not earn any

deposit made in others earn an interest- Liquidity, convenience and low investment risks are the

features of the bank deposits- Deposits in scheduled banks are safe because of the re

RBI and the guarantee provided by the Deposit InsuranCorporation on deposits up to Rs.1,00,000 per deposito


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NON-MARKETABLE SECURITIES

Company deposits- Deposits mobilized by companies are governed by the

section 58A of Companies Act, 1956- The interest offered on this fixed income deposits is hig

what investors would normally get from the banks- Manufacturing and trading companies are allowed to p

maximum interest of 12.5%.- The rates vary depending on the credit rating of the co

offering the deposit

Post Office Monthly Income Scheme- Meant for investors who want to invest a lump sum am

and earn interest on a monthly basis.- Minimum investment is Rs.1000 in multiples of Rs. 1,00- The maximum deposits in all the accounts taken togeth

not exceed Rs.3 lakh in a single account and Rs.6 lakh in


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MONEY MARKET INSTRUMENTS

Debt instruments which have a maturity of less than a year at the timecalled money market instruments

These are highly liquid instruments

Treasury bills- Issued by GOI

- They are of two durations 91 days and 364 days

- Are negotiable instruments and can be rediscounted with GOI- They are sold on an auction basis every week in certain minimum

by the RBI

- They do not carry an explicit interest rate. Instead they are issued

be redeemed at par. The implicit return is a function of the size of

the period of maturity

- They have zero default risk, assured return, are easily available


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MONEY MARKET INSTRUMENTS

Certificate of deposits- Negotiable instruments issued by banks / financial institutions wit

ranging from 3 months to 1 year- These are bank deposits transferable from one party to another- The principal investors are banks, financial institutions, corporate

funds- These carry an explicit rate of interest- Banks normally tailor make their denominations and maturities to

of the investors

Commercial papers- Issued in form of promissory notes redeemable at par by the hold- Usually has a maturity period of 90 to 180 days- They are sold at a discount to be redeemed at par- CPs can be issued by corporates having a minimum net worth of R

an investment grade from credit rating agencies- Minimum issue size is Rs. 25 lakhs


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MUTUAL FUNDS

Also known as an instrument for collective investment

Investment is done in three broad categories of financial asstocks, bonds and cash

Depending on the asset mix, mutual fund schemes are clasEquity schemes, hybrid schemes and debt schemes

On the basis of flexibility, Mutual fund schemes may be: Oor Close ended

- Open ended schemes are open for subscription and redemption tyear

- Close ended schemes are open for subscription only for a specifiecan be redeemed only on a fixed date of redemption

On the basis of objective, mutual funds may be growth funfunds, or balanced funds

NAVof a fund is the cumulative market value of the assets

net of its liabilities


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LIFE INSURANCE

Form of risk management primarily used to hedge against contingent loss.

Equitable transfer of the risk of a loss, from one entity to aexchange for a premium.

Guaranteed small loss to prevent a large, possibly catastro Only thing certain during uncertain times Policy contract binds the insurer to the insured on an agre

protection that will be realized upon an agreed event provthat insured keeps his end of the contract : pay the premiu

The only investment that does not rely on time and is therCOMPLETING.


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REAL ESTATE

Real estate investing involves the purchase, ownership, marental and/or sale ofreal estate for profit.

Improvement of realty property as part of a real estate invstrategy is generally considered to be a sub-specialty of reinvesting called real estate development.

Real estate markets in most countries are not as organizedas markets for other, more liquid investment instruments.

Individual properties are unique to themselves and not dirinterchangeable, which presents a major challenge to an inseeking to evaluate prices and investment opportunities.

Real estate is an asset form with limited liquidity relative toinvestments, it is also capital intensive (although capital mthrough mortgage leverage) and is highly cash flow depen


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PRECIOUS METAL

A precious metal is a rare, naturally occurring metallicelement of high economic value.

Chemically, the precious metals are less reactive thanelements.

Historically, precious metals were important as currennow regarded mainly as investment and industrial com

Gold, silver, platinum, and palladium each have an cuin the market.

The demand for precious metals is driven not only by practical use but also by their role as investments andvalue.

Historically, precious metals have commanded much h

than common industrial metals.


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THE TIME VALUE OF MONEY

Would you prefer to have Rs.1 million now omillion 10 years from now?

Of course, we would all prefer the money n

You already recognize that there isTIME VALUE TO MONEY!!


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TIME

Why is TIME such an important element in ydecision?

TIME allows you the opportunity to post

consumption and earn INTEREST.


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IMPORTANCE OF TIME VALVE OF MONE

The concept of time value of money involves in arriving at the compar

the different rupee amount which is arising at different points of time iequivalent values of a particular point of time either present or future.

The cash flows arising at different periods of time can be made compar

any one of the following two ways:

By compounding the present money to a future date i.e., by finding out

the present money.

By discounting the future money to present date i.e., by finding out pre

(PV) of the future money.


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Formulae

Present Value (PV) of a Single Cash Flow: = (

+)

Present Value of an Annuity: = [

+

+ ]

Future Value (FV) of a Single Cash Flow: = (1 )

Future Value of an Annuity: = A[+

]


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Best Investment Alternative Over Past 5

Mutual Funds (UTI - FLOATING RATE STP Growth of 168.2%)

Gold (Growth of 235%) Silver (Growth of 233%)


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MUTUAL FUN


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GOLD


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SILVER


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GIVE ME TIME OR MOBOTH ARE EQUAL

THANK YOU

investment alternative with respect to time value of.pptx

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