Answer to Question #155653 in Management for Prabhdeep

Question #155653

What are the various Financial instruments available for allocating of bank funds?(Please Answer in 200 to 250 Words )


1
Expert's answer
2021-01-19T07:57:25-0500

Financial Instruments

The financial instrument is monetary agreements signed by different parties. They involve one party offering financial liability while the other gives financial assets.  Such instruments that aid the allocation of bank funds include bonds, checks, Securities, and loans.

 Different bonds are financial instruments because they are assets that can be traded. Such bonds include compounds that entail variables interest, profit participative which allows, and convertible bonds that offer the bearer fixed interest and a chance to become a shareholder of the lending institution (Denisova et al., 2017). Besides, securities are agreements that possess value before being traded. Also, checks are considered an optional contract and great financial instruments when allocating funds. According to Lehmann (2017), equity loans compensate creditors, depending on the lending institutions' produced profit. Under such loans, the creditor is considered a creditor of the last rank because if liquidity is attained, he receives his payments after others. Tracker-certificate loans are different from others. They do not focus on the profits generated by the company, but they generate variable interests. These are the primary financial instruments used by banks.

In conclusion, different companies rely on financial instruments, including banks, in the allocation of funds. They include different types of loans and bonds, Checks, and securities. They are crucial tools that banks should be keen on while using to maximize profits.   

   

References

Denisova, I. P., Rukina, S. N., Samoylova, K. N., & Takmazyan, A. S. (2017). Financial

              Instruments of the Socially Responsible Economy.

Lehmann, M. (2017). Financial instruments. In Encyclopedia of Private International Law (pp. 739-747). Edward Elgar Publishing Limited.


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