SAINT JOSEPH COLLEGE OF SINDANGAN INCORPORATED
National Highway, Poblacion, Sindangan, Zamboanga del Norte
COLLEGE OF BUSINESS ADMINISTRATION
FM13 (Financial Marketing)
CHAPTER 4 Hand-out: Financial Instruments
A financial instrument is any contract that creates a financial asset for one party and a financial liability or
equity instrument for another party.
It is any document or agreement that has monetary value and can be traded, invested in, or used in financial
transactions.
Examples:
Stocks
Bonds
Loans
Derivatives (like futures and options)
Bank deposits
I. Types of Financial Instruments
Financial instruments are generally classified into:
A. Primary Financial Instruments
These are basic instruments that directly represent ownership or debt.
Examples:
1. Stocks (Equity Instruments) – ownership in a company
2. Bonds – loans given to companies or government
3. Loans – money borrowed from banks or institutions
4. Deposits – money placed in banks
B. Derivative Financial Instruments
These are financial contracts whose value depends on the price of an underlying asset (stocks,
commodities, currencies, etc.).
Examples:
1. Futures Contracts – agreement to buy/sell an asset in the future at a fixed price
2. Options – gives the right (not obligation) to buy/sell an asset
3. Swaps – exchange of cash flows between two parties
II. Financial Assets and Financial Liabilities
A financial asset is anything that provides future economic benefit to the holder.
Examples:
Cash
Bank deposits
References: Ma. Elenita Balatbat Cabrera, Gilbert Anthony B. Cabrera (2020) “Financial Markets and Institutions”
Prepared by: MARY MAY E. CALAMBA, LPT, MBA
BSBA Full-time Instructor
Stocks (shares in companies)
Bonds (receivable interest)
Loans given to others
A financial liability is an obligation to deliver money or financial assets to another party.
Examples:
Bank loans
Accounts payable
Bonds issued by a company
Credit card debts
Mortgages
III. Equity Financial Instruments
Equity financial instruments represent ownership interest in a business.
When you own equity, you own a portion of the company.
Key Features:
No fixed repayment
Dividends may be received
Ownership rights (voting in some cases)
Higher risk but higher potential return
Examples:
Common stock
Preferred stock
Share capital
IV. Derivative Financial Instruments
Derivatives are contracting whose value is based on an underlying asset.
1. Futures Contract
Agreement to buy/sell an asset at a future date at a fixed price
Common in commodities like oil, rice, and wheat
2. Options Contract
Gives the buyer the right but not the obligation to buy/sell
Example: Stock options
3. Swap
Agreement to exchange cash flows
Example: interest rate swaps between banks
Summary Table
Type Description Examples
Primary Instruments Direct financial claims Stocks, Bonds, Loans
Derivative Instruments Value based on another asset Futures, Options, Swaps
Financial Assets Provide economic benefit Cash, Stocks, Bonds
Financial Liabilities Obligation to pay Loans, Payables
References: Ma. Elenita Balatbat Cabrera, Gilbert Anthony B. Cabrera (2020) “Financial Markets and Institutions”
Prepared by: MARY MAY E. CALAMBA, LPT, MBA
BSBA Full-time Instructor
Type Description Examples
Equity Instruments Ownership in a company Common stock, Preferred stock
Key Takeaways:
Financial instruments are contracts with monetary value.
They can be classified as primary or derivative.
Financial assets provide future benefits, while liabilities represent obligations.
Equity instruments represent ownership in a company.
Derivatives depend on underlying assets and are used for hedging or speculation.
References: Ma. Elenita Balatbat Cabrera, Gilbert Anthony B. Cabrera (2020) “Financial Markets and Institutions”
Prepared by: MARY MAY E. CALAMBA, LPT, MBA
BSBA Full-time Instructor
SAINT JOSEPH COLLEGE OF SINDANGAN INCORPORATED
National Highway, Poblacion, Sindangan, Zamboanga del Norte
COLLEGE OF BUSINESS ADMINISTRATION
Activity Worksheet 4
FM13 (Financial Marketing)
Name: ____________________________________Date: _____________________________
Instructions: Answer the following.
Part 1: Guide Question:
1. Your family takes a loan from a bank to buy a house.
o Is this a financial asset or liability? Why?
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2. You invest in shares of a Filipino company (e.g., SM Investments or Jollibee).
o What type of financial instrument is this?
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Part 2:
Objective: Analyze and evaluate financial decisions.
Instructions: Answer in paragraph form.
1. If you were an investor, would you prefer stocks or bonds? Why?
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References: Ma. Elenita Balatbat Cabrera, Gilbert Anthony B. Cabrera (2020) “Financial Markets and Institutions”
Prepared by: MARY MAY E. CALAMBA, LPT, MBA
BSBA Full-time Instructor
2. Why do derivatives carry higher risk than primary financial instruments?
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� Reminder
Be honest and base your answers on real experiences.
Write clearly and neatly.
Submit on June 2, 2026.
References: Ma. Elenita Balatbat Cabrera, Gilbert Anthony B. Cabrera (2020) “Financial Markets and Institutions”
Prepared by: MARY MAY E. CALAMBA, LPT, MBA
BSBA Full-time Instructor