Chapter 8 - Financial Markets and Institutions The Capital...

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Unformatted text preview: Financial Markets and Institutions The Capital Allocation Process Financial Markets Financial Institutions Stock Markets and Returns Stock Market Efficiency Chapter 2 2-1 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.” 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 How is capital transferred between savers and borrowers? Direct transfers You buy directly from company Investment banking house Merril Lynch, etrade Financial intermediaries Mutual funds 2-3 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....
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This note was uploaded on 01/22/2012 for the course ACCT 3100 taught by Professor Snow during the Spring '08 term at Toledo.

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Chapter 8 - Financial Markets and Institutions The Capital...

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