Financial Instruments – refers to the contracts that give rise to the formation of

financial assets of one entity and at the same creation of financial liability or an
equity instrument in another company

Common forms of Financial Instruments are:

o Cash – financial asset of the holder, financial liability of the BSP
o Checks - financial asset of the payee, financial liability of the drawer or issuer
o Loan – financial asset of the lender or creditor, financial liability of the borrower
or debtor
o Bonds - financial asset of the holder or investor, financial liability of the issuing
company
o Stocks – financial assets of investor or shareholder, but equity of the issuing
company
Money Market Instruments

 Are inexpensive way for government and Money Market Debt:

financial institutions to raise funds
1. Treasury Bills
 Available for short period of time
2. Commercial Papers
 Rates are lower than funds available for
3. Money Market funds
use over long period pf time
4. Consumer credit, credit card Debit
 Compare to savings deposit, MMIs earns
higher interest.
1. Treasury Bills

 Treasury Bills or popularly known as T-

Bills are peso-denominated short-term
fixed income securities issued by the
Republic of the Philippines through its
Bureau of Treasury. With a minimum of
Php 200,000.
2. Commercial Papers

 Commercial paper is a money-market security issued (sold) by large

corporations to obtain funds to meet short-term debt obligations (for example,
payroll, to fund investment in inventories and receivables) and is backed only by
an issuing bank or company promise to pay the face amount on the maturity date
specified on the note.
3. Money Market Funds

 Money Market Fund is an open-end unit trust established in the Philippines.

The Fund aims to preserve capital and generate income from low-risk fixed
income investments with an average life of not more than 1 year.
 Issued by banks or mutual fund companies
 Usually invested in money market instruments, commercial papers treasury bills.
Long term

 Bonds - It is a security that represents the Most common types of bonds:

debt of a government or business • Term bonds
promising to pay a fixed interest to the
holder of the bond for a definite period of • Serial bonds
time. • Secured bonds
 Notes – is a security that has longer term • Debenture bonds
than money market instrument, but
shorter term than a bond. • Convertible bonds
• Callable bonds
Term bonds Bond that has single maturity date
May be several bonds with same maturity dates

Serial Bond that has series of several maturity dates.

Ex. 10 year bonds with series of maturity every 2 years

Secured bonds Bonds that is secured by issuing company. The security in the form of real
property (Collateral)

Collateral trust bonds If it is secured by stocks or bonds of other companies.

Debenture bonds When bonds is not supported by any collateral or security assurance in
case of non- payment or default

Convertible bonds A bond which can be converted in shares of stocks in later date.

Callable bonds When the issuing company has the option to redeem prior to its maturity
date
Stock

 Type of security that

signifies ownership in
corporation and represents a
claim on the part of the
corporations assets and
earnings