Chapter 3 - Chapter 3 Types of Finance Indirect:...

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Types of Finance Indirect: Institution stands between lender and borrower. Direct: Borrowers sell securities directly to lenders in the financial markets Asset: Something of value that you own Liability: Something you owe. 3-1 Chapter 3
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Financial Instruments: A written legal obligation of one party to transfer something of value, usually money, to another party at some future date, under certain conditions. Means of Payment Purchase goods and services Store of Value Transfer purchasing power into the future Transfer of Risk Transfer risk to from one person to another 3-2 Financial Instruments
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Financial Instruments Characteristics Standardization Overcome the costs of complexity Makes them easier to understand Communicate Information Summarize essential information about issuer Eliminate expense of collecting information Classes Underlying Used to transfer resources Examples: stocks and bonds Derivative Value derived from underlying instruments Examples: Futures and options 3-3
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This note was uploaded on 02/12/2012 for the course ECON 101 taught by Professor Abrams during the Spring '11 term at Adams State University.

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Chapter 3 - Chapter 3 Types of Finance Indirect:...

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