ch04_053005 - CHAPTER4 :Markets...

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    4-1 CHAPTER 4 The Financial Environment:  Markets,  Institutions, and Interest Rates Financial markets Types of financial institutions Determinants of interest rates Yield curves
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    4-2 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  (Savings).
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    4-3 Types of financial markets Physical assets vs. Financial assets Money vs. Capital Primary vs. Secondary Spot vs. Futures Public vs. Private
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    4-4 Mobilizing Savings NATIONAL SAVINGS Consumer saving Business saving State and local budget surpluses Income Spending Product markets Factor markets Spending Saving Financial markets and intermediaries (such as banks and stock and bond markets.)
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    4-5 The Loanable Funds Market QUANTITY OF LOANABLE FUNDS (dollars per year) INTEREST RATE (percent per year) Supply of loanable funds Demand for loanable funds 0 q e r e
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    4-6 How is capital transferred between savers and  borrowers? Direct transfers Investment banking  house Financial  intermediaries
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    4-7 Types of financial intermediaries Commercial banks Savings and loan associations Mutual savings banks Credit unions Pension funds Life insurance companies Mutual funds
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    4-8 Physical location stock exchanges vs.  Electronic dealer-based markets Auction market vs.  Dealer market  (Exchanges vs.  OTC) NYSE vs. Nasdaq Differences are  narrowing
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    4-9 Time Value of Money Present Value  – The value today of  future payments, adjusted for interest  accrual. ( 29 N Future payment PV= 1+interest rate N
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  4-10 Interest Rate Effects The present discounted value of a  future payment declines with: Higher interest rates. Longer delays in future payments.
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ch04_053005 - CHAPTER4 :Markets...

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