 Dear friends, our income in order to meet expenditure on our current consumption. Now the difference between our income and our current consumption along with our willingness to defer our current consumption in order to have more consumption in the future leads towards the concept of investment. There are rare chances that we have a balance between our income and our spendings. This balance may not prevail in real world as we may have some times deficit or sometimes surplus in in these two values. So far as the deficit is concerned, this means that our expenditure on our current consumption is more than our income. This means that we have to borrow a certain amount to meet our current consumption with the willingness or promise to pay more amount to the lender in future. On the other hand, if our income is more than our spendings and our current consumption, we will be in surplus. This means that we are willing to give the immediate possession of our surplus or savings to other one in order to have more for our future consumption. Now we may have two types of usages of our savings. The first usage is to retain our savings for future spendings. This type of savings may be laid at home. The second usage is to lend our savings to other one so that we can have an extra amount from that power in the future for our own future spendings. This means that the rate of exchange at which we are exchanging our futures consumption against our present or current consumption, that exchange rate is basically the pure exchange rate. Here emerges the concept of pure time value of money. This means that it refers to the people's willingness to pay some extra amount for borrowed funds and their desire to receive a surplus on their savings and their willingness gives a rise to an interest rate and particularly this interest rate is referred to as the time value of money. Now we see that interaction of supply of excess income in the form of savings and the demand for excess spending in the form of borrowings in a particular given capital market gives rise to the interest rate. So this is the interaction of savings and borrowings in the form of demand and supply forces that creates an interest rate for the borrowers and the lenders. If an investment whose returns are certain that investment is known as a risk-free investment and that risk-free investment earns a pure rate of interest, this risk-free investment earning a pure exchange rate assumes that the general price level in the economy are constant are stable. But conversely on the other side an investor will require a higher rate of return. This means that the investor will require an extra premium in addition to the nominal rate of interest to compensate for the price rise if there is a price rise. So this means that the investment if the return on that investment are uncertain that will be termed as investment risk and an investor for uncertainty on the future repayments and on some risky investment may demand some extra return and that extra return is termed as a risk premium. This risk premium is addition to the nominal rate of interest. So now we can define the term investment. So what investment is basically it is the certain amount committed at present for a certain time period to derive future payments in order to compensate three things. The first committed time periods for which the investment is hold to expected inflation rate if it is going to happen in the future and third uncertainty of the future cash flows associated with that particular investment during the investment time horizon. So for that investor we have for that investment we have two types of investors there may be individuals or there may be institutions public institutions like government institutions or private institutions like banks pension funds mutual funds and many more. We have two types of investment the first class is the real assets like the assets we have tangible and physical existence substance and they can be seen they have substance in physical form like plant and machinery like buildings, lands, vehicles and so on. The other class of assets is the financial assets like debt instruments like equity instruments are the hybrid instruments like preferred stocks why people invest. In fact the people invest in order to defer their personal current consumption to have more consumptions in the days to come.