The document discusses the importance of studying financial markets and institutions. It defines key concepts like securities, debt markets, interest rates, the stock market, and foreign exchange markets. These financial markets are crucial as they channel funds from savers to investors, promoting economic efficiency and growth. Financial institutions make these markets work by intermediating between savers and borrowers.
The document discusses the importance of studying financial markets and institutions. It defines key concepts like securities, debt markets, interest rates, the stock market, and foreign exchange markets. These financial markets are crucial as they channel funds from savers to investors, promoting economic efficiency and growth. Financial institutions make these markets work by intermediating between savers and borrowers.
The document discusses the importance of studying financial markets and institutions. It defines key concepts like securities, debt markets, interest rates, the stock market, and foreign exchange markets. These financial markets are crucial as they channel funds from savers to investors, promoting economic efficiency and growth. Financial institutions make these markets work by intermediating between savers and borrowers.
The document discusses the importance of studying financial markets and institutions. It defines key concepts like securities, debt markets, interest rates, the stock market, and foreign exchange markets. These financial markets are crucial as they channel funds from savers to investors, promoting economic efficiency and growth. Financial institutions make these markets work by intermediating between savers and borrowers.
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WHY STUDY FINANCIAL
MARKETS AND INSTITUTIONS?
Chapter 1 FINANCIAL MARKETS Funds are transferred from people with excess funds to those with shortage
Promotes greater economic efficiency by
providing productive use for funds FINANCIAL MARKETS Well-functioning markets produce higher economic growth
Has effects on personal wealth, behaviour
of businesses and consumers
Cyclical performance of the economy
SECURITY Also called financial instrument
Claim on issuers future income or assets
(any financial claim or piece of property that is subject to ownership) DEBT MARKETS AND INTEREST RATES Bond is a debt security that promises to make payments periodically for a specified period of time
Also known as bond market
DEBT MARKETS AND INTEREST RATES Enablegovernment and corporations to borrow to finance their activities
Where interest rates are determined
Interestrate is the cost of borrowing or
price paid for rental funds DEBT MARKETS AND INTEREST RATES There are many different types of market interest rates, including mortgage rates, car loan rates, credit card rates, etc.
Interest rates are important at different
levels DEBT MARKETS AND INTEREST RATES On personal level, high interest rates deter from spending but motivates savings
High interest rates might postpone
businesses investment decisions DEBT MARKETS AND INTEREST RATES Because changes in interest rates have important effects on individuals, financial institutions, businesses and overall economy it is important to explain fluctuations in interest rates THE STOCK MARKET A common stock represents a share of ownership in a corporation
Has claim on the earnings and assets of
the corporation
In stock market, shares of stock are
traded THE STOCK MARKET Fluctuations in stock prices affect the size of peoples wealth and affect their willingness to spend
Impact business investment decisions
Priceof shares affects the amount of funds
that can be raised by selling newly issued stock to finance investment spending THE FOREIGN EXCHANGE MARKET Conversion of one currency into another for moving funds between countries takes place
Change in exchange rate affects the cost
of imports and revenue from exports WHY STUDY FINANCIAL MARKETS? Financialmarkets, such as bond and stock markets, are crucial in our economy.
These markets channel funds from savers
to investors, thereby promoting economic efficiency.
Marketactivity affects personal wealth,
the behavior of business firms, and economy as a whole WHY STUDY FINANCIAL MARKETS? Well functioning financial markets, such as the bond market, stock market, and foreign exchange market, are key factors in producing high economic growth. WHY STUDY FINANCIAL INSTITUTIONS? Financial Institutions are the institutions that make financial markets work
Financial Institutions are the
intermediaries, that take funds from the people who save and lend it to people who have productive investment opportunities.