lecture 1 Flashcards
What is the role of the financial system?
Gather money from people or businesses with a surplus and distribute it to those who need it
What is direct investing?
where lender-savers buy securities directly from borrower-spenders in primary markets
What is indirect investing?
Lender-savers deposit funds with financial intermediaries, such as banks, who buy securities from borrower-spenders
what is a lender-saver?
When income > consumption so they save/ deposit. require a return on deposit
What is a financial market?
an environment where demand and supply of capital meet and trade.
What is the unit of trade in a financial market?
Securities
Who are the users of financial markets?
Agents who save more than they spend (provide financing) and agents that spend more than they save, require external financing.
what is a commercial bank?
depository institution with a broad range of loans
what is a thrift?
like commercial bank but loans focused on real estate of consumer loans
what is an insurance company?
protect individuals and corporations
what are security firms and investment banks?
Helps firms issue securities and engage in securities, brokerage and trading
what is a finance company?
make loans to individuals and businesses but financed through short and long term debt not deposits
what is an investment fund?
pool financial resources from individuals and companies and invest them in a diversified portfolio of assets
what are pension funds?
offer savings plans that allow participants to accumulate savings during working years before retirement
How does money travel in a traditional finance system?
sender to senders bank to payment company to receivers bank to receiver
