SU_ECO2072_W3_A1_Dunn_K

SU_ECO2072_W3_A1_Dunn_K - FINANCIAL CONCEPTS BY KIMBRA DUNN...

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FINANCIAL CONCEPTS BY KIMBRA DUNN
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FINANCIAL MARKETS are financial institutions through which savers can directly provide funds to borrowers (Mankiw, N. G. 01/2014). The two important financial markets in our economy today are the bond market and the stock markets. A bond is a certificate of indebtedness. When a new firm wants to build a new factory, it can borrow the money needed directly from the public by selling bonds. It is basically an IOU. Stock is a claim on partial ownership in a firm. Another way to fund a new build is to sell stock in the company.
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FINANCIAL INTERMEDIARIES are financial institutions through which savers can indirectly provide funds to borrowers. The term intermediaries reflects the role of these institutions by standing between savers and borrowers. The two important financial intermediaries are banks and mutual funds. Banks are financial intermediaries that take in deposits from people who want to save and use these deposits to make loans to people who want to borrow. Banks play an important
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