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ch02_fof6 - Foundations of Finance Arthur Keown John D...

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Foundations of Finance Arthur Keown John D. Martin J. William Petty
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The Financial Markets and  Interest Rates Chapter 2
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  Keown, Martin, Petty - Chapter 2 3 Learning Objectives 1. Describe key components of the U.S. financial  market system. 2. Understand the role of the investment-banking  business in the context of raising corporate capital. 3. Distinguish between privately placed securities and  publicly offered securities. 4. Be acquainted with securities floatation costs and  securities markets regulations.
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  Keown, Martin, Petty - Chapter 2 4 Learning Objectives 1. Understand the rate-of-return relationships among  various classes of financing vehicles that persist in  the financial markets. 2. Be acquainted with recent interest rate levels and  the fundamentals of interest rate determination. 3. Explain the popular theories of the term structure of  interest rates. 4. Understand the relationships among the  multinational firm, efficient financial markets, and the  inter-country risk.
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  Keown, Martin, Petty - Chapter 2 5 Slide Contents 1. Principles Used in this chapter 2. Components of US Financial Market 3. Investment Banker 4. Sarbanes-Oxley Act 5. Rates of Return in Financial Market 6. Interest Rate Determinants 7. Term Structure of Interest Rates 8. Finance and the Multinational Firm
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1. Principles Used in this Chapter
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  Keown, Martin, Petty - Chapter 2 7 Principles Used in this Chapter Principle 1 The Risk-Return Tradeoff — We Won’t Take on  Additional Risk Unless We Expect to Be Compensated  with Additional Return. Principle 6 Efficient Capital Markets — The Markets are Quick and  the Prices Are Right. Principle 10 Ethical Behavior Is Doing the Right Thing, and Ethical  Dilemmas Are Everywhere in Finance.
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2. Components of U.S.  Financial Market System Public Offering Versus Private Placement Primary Versus Secondary Market Money Versus Capital Market Organized Exchange Versus OTC market Spot Versus Futures Market
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  Keown, Martin, Petty - Chapter 2 9 Financial Markets Financial markets exist in order to allocate the supply  of savings in the economy to the demanders of those  savings.  Financial markets are institutions and procedures that  facilitate transactions in all types of financial claims. A  securities market is simply a place where you can  buy and sell securities (example, New York Stock  Exchange)
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  Keown, Martin, Petty - Chapter 2 10 Benefits of Financial Markets  example If you have $200,000 to invest, what would be  the benefit of buying shares in 20  corporations rather than opening your own  business?
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  Keown, Martin, Petty - Chapter 2 11 Benefits of investing in financial assets (like 
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