CFFM6_ch 02_slides - Chapter2 FinancialMarketsand...

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Financial Markets and  Institutions The Capital Allocation Process Financial Markets Financial Institutions Stock Markets and Returns Stock Market Efficiency Chapter 2 2-1
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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.”  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. 2-2
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How is capital transferred between  savers and borrowers? Direct transfers Investment banking  house Financial  intermediaries 2-3
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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. 2-4
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Types of Financial Markets Physical assets vs. Financial assets Spot vs. Futures Money vs. Capital Primary vs. Secondary Public vs. Private 2-5
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The Importance of Financial Markets Well-functioning financial markets facilitate the  flow of capital from investors to the users of  capital.
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This note was uploaded on 04/23/2011 for the course ECON 101 taught by Professor Egghead during the Spring '11 term at Allen County Comm College.

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CFFM6_ch 02_slides - Chapter2 FinancialMarketsand...

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