ch02_fof6

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

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Unformatted text preview: Foundations of Finance Arthur Keown John D. Martin J. William Petty The Financial Markets and Interest Rates Chapter 2 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. 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. 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 1. Principles Used in this Chapter Keown, Martin, Petty - Chapter 2 7 Principles Used in this Chapter Principle 1 : The Risk-Return Tradeoff We Wont 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. 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 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) 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? Keown, Martin, Petty - Chapter 2 11 Benefits of investing in financial assets (like...
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ch02_fof6 - Foundations of Finance Arthur Keown John D....

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