CH01 Flashcards
(22 cards)
Financial markets
Transfer $$ from people with excess to people with a shortage
Security / financial instrument
Claim on issuers FV income/assets
INT %
$$ paid for rental of funds
Ex: I/Y of 4% on a 1y loan of $100 (FV = $104)
Types of Financial Markets
Hint : 2
- Bond Market
- Stock Market
Bond Markets
Debt security = periodic PMTs @ specific times
I/Y (%) = IMPORTANT
Stock Market
Stock= share of ownership of org.
Asset = ANY financial claim subject to ownership
“Value” = reflects both, comp.’s assets & expectations for the future
Financial Intermediaries
(Organization enables Financial Markets to work)
“Transfers” funds (savers—> those in need of (I) funds)
Banks
“Borrow” funds by accepting deposits
(Chartered banks, trust & mortgage, Cr unions, causes populaires)
Other Fin. Institutions
( insurance companies, fin. Companies, pension funds, mutual funds, investment banks)
Financial Innovation
Innovation & E- Finance
Innovation : development of new g&s in FM
(Increase efficiently)
E-Finance : Online FMs and services
Financial Crisis
Major disruptions in FM
(Ex: sharp fall in asset value, failure of firms)
Money
Anything accepted as PMT for g&s + debt
Monetary Policy
Used to influence the eco. = central role of Bank of Canada
Money / Monetary Policy affects:
- bus. cycle
- INF
- I/Y
Business Cycle
Up or down mouvement of Aggregate O in the eco.
UNEMP % = heavily affected
Money & INF
Aggregate PL = ave. $$ of g&s in eco.
INF = ”overall” PL increase
(Affects EVERYONE)
Fiscal & Monetary Policy
Fiscal Policy = gov. Expenditures & tax revenue
- federal & provincial gov.
Monetary Policy = managing MS & I/Ys
- Bank of Canada
Budget Deficit
Spending > Revenue
Budget Surplus
Spending < Revenue
Why study International Finance?
- globalisation of (FM) = rapid pace
- Borrowing & Lending = can cross boarders
Foreign Exchange Market
Where funds are converted from one currency to an other
Foreign Exchange Rate (%)
The $ of one currency relative to another
* EXCHANGE RATES DETERMINE THE MARKET*