Chapter 2-Financial Markets

Chapter 2-Financial Markets - 5-1CHAPTER 5Financial Markets...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 5-1CHAPTER 5Financial Markets and Institutions•The Capital Allocation The Capital Allocation ProcessProcess•Financial marketsFinancial markets•Financial institutionsFinancial institutions•Stock Markets and ReturnsStock Markets and Returns•Stock Market EfficiencyStock Market Efficiency5-2Learning Objectives•Describe three ways in which the transfer of capital takes place.•List some of the many different types of financial markets, and identify several recent trends taking place in the financial markets.•Identify some of the most important money and capital market instruments, and list the characteristics of each.•Compare and contrast major financial institutions.•Distinguish between the two basic types of stock markets.•Identify the three classifications of stock market transactions.•Read stock quotations from a variety of sources/publications.•Briefly explain the Efficient Markets Hypothesis (EMH), identify the three levels of efficiency, and discuss the implications of market efficiency.5-3The Capital Allocation Process•In a well-functioning economy, capital flows efficiently from those who supply capital to those who demand it.•Suppliers of capital – individuals and institutions with “excess funds”. These groups are saving money and looking for a rate of return on their investment.•Demanders or users of capital – individuals and institutions who need to raise funds to finance their investment opportunities. These groups are willing to pay a rate of return on the capital they borrow.5-4How is capital transferred between savers and borrowers?•Direct transfers•Investment banking house•Financial intermediaries5-5Capital Transfer Forms•Direct Transfers of money and securitiesDirect Transfers of money and securities. This takes place when a business sells its stocks or bonds directly to savers, without going to any type of financial institution.•Indirect Transfers Indirect Transfers through an investment banking house. Company sells securities to the Investment bank, which in turn sells these securities to investors.5-6Capital Transfer Forms•Financial Intermediary-Financial Intermediary-The intermediary obtain funds from savers in exchange for its own securities. The intermediary uses this money to buy and hold businesses’ securities.5-7Diagram of the Capital Formation Process5-8What is a market?•A market is a venue where goods and services are exchanged.•A financial market is a place where individuals and organizations wanting to borrow funds are brought together with those having a surplus of funds....
View Full Document

{[ snackBarMessage ]}

Page1 / 40

Chapter 2-Financial Markets - 5-1CHAPTER 5Financial Markets...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online