These institutions attract funds from individuals

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Unformatted text preview: ndirectly borrow from them. The government, like business firms, is typically a net demander of funds. It typically borrows more than it saves. We’ve all heard about the federal budget deficit. Major Financial Institutions WW W The major financial institutions in the U.S. economy are commercial banks, savings and loans, credit unions, savings banks, insurance companies, pension funds, and mutual funds. These institutions attract funds from individuals, businesses, and governments, combine them, and make loans available to individuals and businesses. Descriptions of the major financial institutions are found at the textbook’s Web site at www.aw.com/gitman. Financial Markets financial markets Forums in which suppliers of funds and demanders of funds can transact business directly. private placement The sale of a new security issue, typically bonds or preferred stock, directly to an investor or group of investors. public offering The nonexclusive sale of either bonds or stocks to the general public. Financial markets are forums in which suppliers of funds and demanders of funds can transact business directly. Whereas the loans and investments of institutions are made without the direct knowledge of the suppliers of funds (savers), suppliers in the financial markets know where their funds are being lent or invested. The two key financial markets are the money market and the capital market. Transactions in short-term debt instruments, or marketable securities, take place in the money market. Long-term securities—bonds and stocks—are traded in the capital market. To raise money, firms can use either private placements or public offerings. Private placement involves the sale of a new security issue, typically bonds or preferred stock, directly to an investor or group of investors, such as an insurance company or pension fund. Most firms, however, raise money through a public offering of securities, which is the nonexclusive sale of either bonds or stocks to the general public. CHAPTER 1 primary market Financial market in which securities are initially issued; the only market in which the issuer...
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This document was uploaded on 01/19/2014.

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