FINANCIAL INSTRUMENTS:

A financial instrument is defined as a contract between individuals/parties that

1. CERTIFICATE OF DEPOSIT (CD):

A certificate of deposit (CD) refers to a financial product that is offered by financial institutions
– such as banks and credit unions – that allow customers to earn a certain level of
interest on their deposits, and in return, they must leave the deposit untouched for a
certain period of time or risk paying a penalty if it is withdrawn early.
Example:
Faysal Islamic Barkat Investment Certificate
Minimum amount required for PKR investment is Rs. 50,000/
Tenures: 1 month up to 5 years

2. TREASURY BILLS:
 Treasury Bills (or T-Bills for short) are a short-term financial instrument that is issued by
the US Treasury with maturity periods ranging from a few days up to 52 weeks (one
year).
 They are considered among the safest investments since they are backed by the full faith
and credit of the United States Government.
 When an investor buys a Treasury Bill, they are lending money to the government.
 The US Government uses the money to fund its debt and pay ongoing expenses such as
salaries and military equipment. T-Bills are sold in denominations ranging from $1,000
(standard) up to a maximum of $5 million.
Treasury bills are issued by Government of Pakistan (GoP) and are sold in the
primary market through auctions conducted by State bank of Pakistan (SBP).
Tenor 3, 6 & 12 Month
Denominations Multiple of PKR 5,000

BANKER'S ACCEPTANCE
The banker's acceptance is a form of payment that is guaranteed by a bank rather
than an individual account holder.
Banker's acceptance (BA) is a negotiable piece of paper that functions like a post-
dated check.
Face Value of Banker's Acceptance Rs 1,000,000
Minus 2% per Annum Commission for One Year Rs -$20,000
Amount Received by Exporter in One Year Rs 980,000
BAs are most commonly issued 90 days before the date of maturity but can mature
at any later date from one to 180 days.
Banker's acceptances are traded at a discount in the secondary money markets.
PROCESS:
MUNICIPAL BOND
A municipal bond is a debt security issued by a state, municipality or county to
finance its capital expenditures, including the construction of highways, bridges or
schools.
They can be thought of as loans that investors make to local government.
Interest paid on municipal bonds is often tax free, making them an attractive
investment option for individuals in high tax brackets.
CORPORATE STOCK
Corporate stock refers to a type of ownership in a legal business entity.
Corporations typically issue stock to raise money from investors to fund capital
expenditures or future growth.
Typically corporate stock is broken up into common or preferred stock.
Common stock is a type of security that represents ownership of equity in a
company. There are other terms – such as common share, ordinary share, or voting
share – that are equivalent to common stock.
Holders of common stock own the rights to claim a share in the company’s profits
and exercise control over it by participating in the elections of the board of
directors, as well as in voting regarding important corporate policies.
On average, common shares offer a higher return relative to preferred stock.
However, the higher returns come with the higher risks associated with such
securities.
Preferred shares (also known as preferred stock or preference shares) are
securities that represent ownership in a corporation, and that have a priority claim
over common shares on the company’s assets and earnings.
Holders of preferred stock are also prioritized over holders of common stock in
dividend payments.
Generally, the shares do not assign voting rights to their holders.
Preferred shares may be converted to a predetermined number of common shares.
They can be:
Convertible preferred stock: The shares can be converted to a predetermined
number of common shares.
Cumulative preferred stock: If an issuer of shares misses a dividend payment, the
payment will be added to the next dividend payment.
Exchangeable preferred stock: The shares can be exchanged for some other type
of security.
CORPORATE BONDS:
A corporate bond is a type of debt security that is issued by a firm and sold to
investors.
The company gets the capital it needs and in return the investor is paid a pre-
established number of interest payments at either a fixed or variable interest rate.
PIBs are long-term, semi-annual coupon-based instruments issued by Government
of Pakistan (GoP) and are sold in the primary market through auctions conducted
by State bank of Pakistan (SBP).
Tenor 3, 5, 10, & 20 Years
Denominations Multiple of PKR 100,000
MORTGAGE:
A mortgage is a loan taken out to buy property or land. Most run for 25 years but
the term can be shorter or longer.
The loan is ‘secured’ against the value of your home until it’s paid off.
If you can’t keep up your repayments the lender can repossess (take back) your
home and sell it so they get their money back.

CONSUMER LOANS:
In other words, a consumer loan is any type of loan made to a consumer by a
creditor.
The loan can be secured (backed by the assets of the borrower) or unsecured (not
backed by the assets of the borrower).
Types of Consumer Loans
Mortgages: Used by consumers to finance the purchase of a house
Credit cards: Used by consumers to finance everyday purchases
Auto loans: Used by consumers to finance the purchase of a vehicle
Student loans: Used by consumers to finance education
Personal loans: Used by consumers for personal purposes

COMMERCIAL LOANS:
Commercial loans are used by companies to buy equipment or grow their business.
Consumer loans are used by people to purchase cars, remodel homes, and other
personal uses.
EXAMPLE:
ALFALH KAROBAR FINANCE
Working capital loans are used to finance a business’s short-term capital needs
for daily expenses.
They are often used seasonally for things such as buying inventory, paying extra
staff, purchasing equipment, or other operational costs.
Real estate loans are used to purchase and invest in property. They can be used for
both residential or commercial properties.

LEASE:

A lease is an implied or written agreement specifying the conditions under which a