SECURITIES either positive or negative effect sa value

ng investment.
 Form of ownership that can be easily traded on
Interest rate risk ang pinakang
a secondary market
naapektuhan nito yung mga bonds kaysa
 It allow investors to own the underlying asset sa mga stocks, and it is a major risk to all
without taking possession. bondholders. As interest rates rise, bond
Marketable Securities prices fall, and vice versa.

Securities than can be convert into cash in the near EXAMPLE:

term. Halimbawa nagpurchase ka bond from
The liquidity of marketable securities - is Company XYZ. And then nagkaroon ng
magmamatured sya ng less than one year, and yung unexpected increase in interest rates
rates na related sa security that can be bought or sold ay ibig sabihin yung investment mo baba
may little effect lang sa price. ang value. So, If you expect na ibenta na
lang yung bond before it matures, ang
Marketable securities are classified as either a mangyayari since tumaas ang interest
marketable equity security or a marketable debt rate, ibebenta mo yung bond na mas
security. mababa sa price kung magkano mo sya
binili.
 marketable equity security – an entity’s
 Of course, the magnitude of
ownership of other companies’ common stocks
change in the bond price is also
 marketable debt security – these are bonds
affected by
issued by corporations, municipalities, and the
the maturity, coupon rate, its
government
ability to be called, and other
Reasons for Holding Marketable Securities characteristics of the bond.

• They serve as a substitute for cash balances –

3. Inflation risk
yun ginagamit ang marketable securities as
substitute sa mga cash balance, yung mga Inflation is the rate at which the general level of
diniscuss kanina isa na ditto yung precautionary prices for goods and services is rising and, consequently,
balanace, na diniscuss ko the purchasing power of currency is falling

• They are held as a temporary investment – Halimbawa:

• They are built up to meet known financial 2017 – ngayon yung value ng 1000 mo kapag
requirements – since mabilis iconvert ang bumili ka ng damit, makakabili ka ng tatlong damit then
marketable securities into cash , madali mo na 2019, biglang nagkaroon ng inflation, so tumaas ang
ring mababayaran yung mga financial presyo ng mga damit,ngayon ang purchasing power o
requirement such as yung mga tax payment and value ng 1000 mo, ang kaya na lang bilhin ay isang damit.
maturing bond issue.
So dito pinapakita lang na Malaki ang impact ng
Factors influencing the choice of Marketable Securities inflation sa mga investment , kaya ang inflation risk ay
tinatawag ding purchasing power risk dahil yung cash
 Risk - flows from an investment ay hindi na magiging worth as
1. Default Risk – kind of risk na kung saan much in the future because of changes in purchasing
si Borrower ay hindi makapagbayad ng
power due to inflation
principal at interest on time.
2. Interest rate risk – risk na if may chance
na magkaroon ng unexpected change sa
4. Marketability (Liquidity Risk)- nangyayari
interest rate ay pwedeng magkaroon ng
sya kapag ang isang individual investor,
business or financial institution ay hindi
 kayang ma-meet yung mga short-term a higher yield may be expected on the less liquid
debt obligations or hindi kayang iconvert investments.
yung security into cash for a short The higher a security’s risk, the higher its required
period of time or hard return
asset to cash without a loss
of capital and/or income in the process.
Isa sa mga factor ay rate of return: Di ba lahat ng
investment may certain level of risk, and then yung
5. Event Risk - risk of a negative impact on
return is not guaranteed. Kaya kailangan nating
a company's financial position as a result
iconsider ang rate of return sa pagpili ng mga
nung mga unexpected event like a
securities, and then dito ang mga investor should
natural disaster, industrial accident
understand yung degree nung risk na pwde nilang
or hostile takeover.
maencounter sa kanilang mga investments o gaano
sila kawilling na irisk yung kanilang pera inexchange
Example: The terrorist attack on September 11, 2001 for potential gain or in worse case loss. But in
was a massive external event which disrupted business general mas maganda dw mag-invest duon sa mga
activities and caused huge shareholder losses in the security na mataas yung risk, dahil mataas din yung
airline and financial services industries. rate of return na pwde mong makuha.

 Maturity Types of Marketable Securities

Two Major Type of Money Market Instruments

Recall lang natin di ba ang price ng debt
securities katulad ng bond pwdeng magdecrease 1. Discount Paper- are money market instruments
kapag ang interest rates ay tumaas and then that are issued at a value less than (or
increase kapag interest rates ay bumaba. For a “discounted” from) their stated face value and
given change in interest rates, prices of longterm mature for their face value.
securities fluctuate more widely than prices of
Discount instruments include
short-term securities with equal default risk. Yun
nga mas mabilis magbago ang price ng mga  Treasury bills,
long-term securities as compared sa short term.,  commercial paper, and
if ever na may change sa interest rate. Kaya  Bankers acceptances.
yung mga investor na may mga long-term
securities, they are exposed to a greater risk of
2. Interest-bearing securities - A fixed-interest
loss if the securities have to be sold prior to
security is a debt instrument such as a bond,
maturity.
debenture, or gilt-edged bond that investors use
to loan money to a company in exchange for
Kaya mas maganda daw na mag-invest sa mga securities interest payments.
na ang maturity date is in less than 90 days. Dahil ang
Treasury Bills
mga Short-term investments they carry less return than
long-term investments, since the default risk and the  are short-term security with maturity of less than
interest rate risk are minimized with short-term one year
instruments.
 Treasury bills are one of the safest forms of
 Yield or Return on Securities
The criterion must involve an evaluation of the investment because they are backed by the
risks and benefits inherent in different securities. government. They are considered risk-free.
If a given risk is assumed, such as lack of liquidity,
 these are government bonds or debt securities
  Katulad din ng commercial paper, treasury bill are  Pero paano kung winitdraw mo na kaagad
issued at a discount and investors get a face value yung pera sa bangko before yung term na nap
on maturity agkasunduan nyo, dito kailangan mong
magbayad ng early withdrawal penalty
Other Short-Term Commercial Papers Issued by
 Yung penalty pwedeng ibawa s mula duon sa
Finance Companies and Other Corporation
naearned mo na interest or kung kulang
 an unsecured form of promissory note that pwede ding mabawasan yung initial deposit
pays a fixed rate of interest,. Type of security mo. Kaya mas better daw po na magdeposit
na wala syang mga collateral sa savings account, kasi if may time na
 Ang commercial paper typically iniissue sya kailanganin mo yung pera., madali kang
ng mga large banks or corporations to cover makawithdraw.
short-term receivables and meet short-term  Kasi ang pagkakaiba ng Savings accounts sa
financial obligations, such as funding for a CSD. Sa savings account pwede kang
new project magdeposit and pwde mo ring iwithdraw
yung pera any time while sa CSD, since time
 One of the advantage of commercial paper deposit nga sya, meron kayong fixed term na
is hindi na sya kailangan pang iregister sa
napagkasunduan, para maaccess or
Securities and Exchange Commission
mawithdraw yung perang dineposit mo
(SEC) as long as it magmamature ito before
kailangan mo munang magbayad ng penalty,
nine months, or 270 days. Kaya ang
commercial paper ay kinoconsider as a very for the breach of contract.
cost-effective means of financing. Repurchase Agreement
 Yung proceeds mula ditto sa commercial
paper ay pwede lang gamititn sa mga  A repurchase agreement is the
current assets, or inventories, at hindi sila equivalent of a short-term, collateralized
pwedeng gamitin sa mga fixed assets, such loan.
as a new plant, ng walang SEC involvement.  Yung owner nung marketable securities
ibebenta yung securities sa a buyer for
Negotiable Certificate of Deposit cash.
 Ito po ay time deposit  As part of the deal, si seller at si buyer
 It is an agreement between kay depositor at ay nagkaroon ng agreement na kung
kay bangko. So ditto, si depositor saan si seller irere-purchase nya yung
magdedeposit sya ng pera for a fixed period the securities in the future, and then si
sa bangko na magbabayad naman sa kanya buyer, ibebenta nya naman yung
ng interest, bilang kapalit. securities kay seller in the
 Makaka-receive ka ng mas mataas interest future,(reverse repurchase agreement).
rate kapag mahaba yung time commitment  So yung price na ibabayad
dun sa fund na dineposit mo sa bangko to repurchase the securities ay mas
mataas than the original selling price.
 Kapag meron kang certificate of deposit,
Yung difference between the original
willing ang mga bangko na magbayad sayo ng
price and the repurchase price is
mataas na interest, since may fixed term na
equivalent to interest.
napagkasunduan kung kailan pwedeng
withdraw ni depositor ang kanyang pera. So  Kaso meron ding risk ang repurchase
yung pera ay ipapahiram muna ni depositor agreement: what if si original seller ay
sa bangko for a longer period, and then yung hindi na kayang repurchase yung
pera pwede ng gamitin ng bangko for a securities. In that case, si buyer may
longer-term investment like loans., and as a right syang ibenta yung securities sa
reward para sa mga depositor, yung bangko market.
willing silang magbayad ng mataas na
interest.
'Banker's Acceptance Precautionary Balance

 a short-term debt instrument issued by a  Cash held for emergencies or an unexpected

company that is guaranteed by a commercial outflow of funds is referred to as precautionary
bank. balances.
 Banker’s Acceptance is a time drafts  Ito yung mga cash na tinatabi para sa mga
 a type of short-term credit na ginagamit unforeseen emergency.
for financing transactions of goods in  Halimbawa ay yung mga cash receipts and cash
international trade payments sa isang company na kung saan they
 The financial institution promises to pay the cannot be perfectly foreseen, kaya di ba minsan
exporting firm a specific amount on a specific nagkakaroon di ng mga fraud. Kaya yung ibang
date, at which time it recoups its money by mga company naghohold sila ng mga
debiting the importer’s account. precautionary balances to minimize the potential
 Halimbawa gusto magpurchase ng goods ni loss arising from a contingency.
Phillippines mula sa Japan, ditto ang importer
Reducing the need for precautionary balance
natin ay ang Pilipinas at ang exporter ay ang
Japan. Kapag nag-issue ng banker’s acceptance 1. More accurate cash budgeting
ang Philippines that is guaranteed by the bank. - Dapat yung estimation ng cash inflows
 Bali ang mangyayari, si Bangko muna ang and outflows ay accurate
magbabayad nung specific amount nung lahat
 Cash budgets are generally used to estimate
ng goods na binili ni Philippines, on a specific
whether yung isang company ba ay may
date. After mabayaran ng Bangko si exporter
sufficient amount of cash to uphold yung mga
(JAPAN), ang sisingilin nya na ay si Importer regular operations.
(Phillippines). Dito sa Banker’s Acceotance, since  Since meron tayong cash budgeting, Kapag
it is a time draft, yung bangko allow si buyer malapit ang amount ng cash inflows at cash
(Phillippines) a delay in payment after accepting a outflows, the more certain daw po yung
shipment of exported goods. forecasts, and the less need for precautionary
balances.
Money Market Mutual Fund
2. 'Line Of Credit’
 Money market funds are fixed income mutual
- dapat mag-established ng maximum
funds that invest in debt securities characterized
amount of a loan that the customer can
by short maturities and minimal credit risk.
borrow.
 Ang money market fund ay isang investment na - Dito po sa line of credit si borrower
ang objective ay mag-earn interest para sa mga pwede nyang ma-access yung funds
shareholders while maintaining a net asset value from the line of credit at any time, as
(NAV) of P1 per share long as hindi nya maexceed yung
 Net Asset Value = (A-L) / No. of Shares maximum amount set in the agreement
 NAV –ito yung fund's value na pwdeng makuha and meets any other requirements, such
ni investor once na winithdraw nya na yung as making timely minimum payments.
kanyang perang dineposit. - Maganda rin na may line of credit para
 Money market mutual funds nag-ooffer sya ng mamonitor at macontrol mo yung mga
convenient parking place for cash cash outflows.
reserves kapag si investor ay hindi pa ready mag-
investment or is anticipating a near-term cash 3. Temporary investments
outlay for a non-investment purpose. - are securities that can be sold in the
near future.
- Mas maganda daw pong mag-invest sa
mga highly liquid securities, mga
securities na mabilis iconvert into cash
 kaysa sa maghold ng mga idle
precautionary cash balance.
- Dahil kapag nag-invest ka sa mga short-
term securities, yung fund na itatabi mo
ay mag-eearn pa ng interest.