FMR CH 1.pptx - Introduction to Financial Market Course Facilitator Muhammad Raghib Zafar Chapter 1 The Financial System Book Financial Institutions

FMR CH 1.pptx - Introduction to Financial Market Course...

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Introduction to Financial Market Course Facilitator Muhammad Raghib  Zafar
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Chapter 1 The Financial System Book: Financial Institutions Instruments and Markets BY Christopher Viney
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Chapter Organization 1.1 Introduction 1.2 Functions of the Financial System 1.3 Financial Instruments 1.4 Financial Markets 1.5 Impact of Globalization 1.6 Financial Institutions Chapter 1
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Financial Markets A system comprised of individuals and institutions, instruments, and procedures that bring together borrowers and savers.
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1.1 Introduction Money Medium of exchange Allows specialization in production Solves the divisibility problem, i.e. where medium of exchange does not represent equal value for the parties to the transaction Facilitates saving Store of wealth
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1.1 Introduction (cont.) Role of markets Facilitate exchange by Bringing opposite parties together Establishing rates of exchange, i.e. prices Surplus units Savers of funds available for lending Deficit units Borrowers of funds for capital investment and consumption
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1.1 Introduction (cont.) Financial instrument Issued by a party raising funds, acknowledging a financial commitment and entitling holder to specified future cash flows Flow of funds Movement of funds through the financial system between savers and borrowers giving rise to financial instruments
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1.1 Introduction (cont.) Financial system Financial institutions, instruments and markets facilitating transactions for goods and services and financial transactions Overcomes difficulty of Double coincidence of wants Transaction between two parties meets their mutual needs
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1.1 Introduction (cont.)
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Key Players in a Financial Market S.no Investors Speculators 1. Planning Horizon Long Term Short Term 2. Expected Return Normally in line with the Market Higher than Normal Market Returns 3. Risk Moderate /Market Risk More than Market Risk 4. Basis for Decision Making Fundamental Analysis Technical Analysis 4. Leverage Typically Invest his own Funds Typically Invest Borrowed Funds Gambling is different from Speculation 
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1.2 Functions of the Financial System Attributes of financial assets Return or yield Total financial compensation received from an investment expressed as a percentage of the amount invested Risk Probability that actual return on an investment will vary from the expected return Liquidity
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