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Lecture2 - Lecture 2 Financial Markets And Instruments...

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Lecture 2, BUS 136, Investments, UC 1 Lecture 2 Financial Markets And Instruments
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Lecture 2, BUS 136, Investments, UC 2 Financial Markets Financial markets are “places” where people buy or sell financial assets or securities such as bonds, stocks, options, or futures. Examples: Securities exchanges (with a centralized location): New York Stock Exchange (NYSE): stocks and bonds American Stock Exchange (AMEX): stocks and options New York Mercantile Exchange (NYMEX): futures Chicago Board of Trade (CBOT): futures Chicago Board Option Exchange (CBOE): options Chicago Mercantile Exchange (CME): futures Over the Counter (OTC) market (No physical location) National Association of Securities Dealers Automated Quotation system(NASDAQ) - stocks
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Lecture 2, BUS 136, Investments, UC 3 Financial Markets Financial markets are traditionally segmented into money markets and capital markets according to instruments/securities traded. Money markets include short term, highly liquid and relatively low risk debt securities. Capitals markets include longer term, relatively riskier securities. They are subdivided into longer-term debt markets, equity markets and derivative markets.
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Lecture 2, BUS 136, Investments, UC 4 Taxonomy of Markets Money Markets or “cash” Market (a subsector of the fixed income market) Equity or Stock Markets Fixed Income Markets (Debt or Bond Markets) Derivative Securities Markets (includes markets for futures, options, etc.)
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Lecture 2, BUS 136, Investments, UC 5 Money Market Instruments Short Term Debt Instruments Short-term (less than one year) Liquid low-risk Examples include CD, commercial paper, t-bill, eurodollar, Federal funds, etc.
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Lecture 2, BUS 136, Investments, UC 6 Treasury Bills Short-term government debt securities Sold through auction by the U.S. Treasury Maturity of one year or less Interests are paid through discount sale – investors buy the bills at a discount from the stated maturity value. Interests are tax-exempt at the state and local level
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Lecture 2, BUS 136, Investments, UC 7 CD, Commercial Paper, Eurodollar A certificate of deposit (CD) is a time deposit with a bank – money may not be withdrawn on demand.
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