1)Real Asset- assets used to produce goods and services. Generate net income to the economy(land,equipment,education). Financial Assets- claims on real assets(stocks,bonds,cash). Agency Problem- managers avoid risky projects to protect their own jobs. Financial Intermediaries- Connection btw the firm and the individual. Half of all stocks are held by large institutions like pension and mutual funds. Investment Bankers-firms specializing in the sale of new securities. Primary Market =new security issues to the public. Secondary Markets- trade previously issued securities among themselves. Securitization- allow lenders to remove loans from their portfolios by selling bonds backed by T-Bonds. 2)Money Market- sector of the debt markets, includes short-term, highly liquid, low risk debt instrument. Bond Market- long term borrowing that trade, comprised of fixed income. Municipal Bonds- tax-exempt, low yields, Taxable returns- 6%(1-.tax bracket)=, TaxFree-4%/(1-TB=, Corporate Bonds-long term debt,
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This note was uploaded on 11/15/2011 for the course FIN 401 taught by Professor Staff during the Spring '08 term at Miami University.