Chapter_02 - Financial Markets and Institutions The...

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Unformatted text preview: Financial Markets and Institutions § The Capital Allocation Process § Financial Markets § Financial Institutions § Stock Markets and Returns Chapter 2 12-1 The 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”. § 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. § Willing to pay a rate of return on the capital they borrow. 22-2 How is capital transferred between savers and borrowers? § Direct transfers § Investment banking house § Financial intermediaries What 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. 42-4 Types of financial markets § Money vs. Capital § Primary vs. Secondary § Spot vs. Futures § Public vs. Private 52-5 The importance of financial § Well-functioning financial markets § facilitate flow of capital § investors to the users of capital § Savers receive returns on their money saved/invested § Users receive necessary funds to finance investment § Promote economic growth § Perform better than economies with poorly- 62-6 Derivatives...
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This note was uploaded on 04/19/2011 for the course BUSFIN 1030 taught by Professor Zutter during the Summer '08 term at Pittsburgh.

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Chapter_02 - Financial Markets and Institutions The...

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