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How to evaluate financial products: The Minibond example
Financial investment products such as bonds and stocks are pretty easy to understand, however making the decision of investing in a specific bond or stock is based on your assessment of the company, the industry it operates in and the prospect of the global economy. When it comes down to derivatives (options and warrants e.g.), and structured products, things get complicated. The returns and risks are not easy to assess compared to the promised returns. A good and easy way to do a quick check is to look at the returns in the good state of the world and the losses in the bad state of the world. The good state of the world enables you to understand what you will gain if the economy is good, the industry is thriving and the company is growing. The bad state of the world should quickly show you what your losses will be if the company is not doing well. Of course, these two states are based on assumptions, but it will give you a good idea of what your risks and rewards are in a simple and quick financial che
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