TOPIC 2: THE FINANCIAL MARKET ENVIRONMENT Flashcards
Are intermediaries that channel the SAVINGS of Individuals, businesses, and governments into LOANS OR INVESTMENT.
Financial Institutions
Individuals are ___ ______ of funds.
Net suppliers
Business and Governments are net ______ of funds.
Demander
Provide SAVERS with a SECURE Place to invest funds and it also offers loans to individual and businesses borrowers.
Commercial Banks
• Assist companies in RAISING CAPITAL
• ADVISE Firms on major transactions such as ______ and _______ restructurings.
•Engage in trading and marketing activities
Investment Banks
•Mergers and Financial Restructurings
was an act of Congress in ____ that created the federal deposit insurance
Glass-Steagall Act
•1933
•engage in ______ activities, much like traditional banks but DO NOT ACCEPT ______.
• are not subject to the _______ regulations as traditional banks.
Shadow Banking System
•Lending
•Deposits.
- same
Are FORUMS in which suppliers and demanders or funds CAN TRANSACT BUSINESS DIRECTLY.
Financial Markets
• Transactions in “Short-Term marketable securities” take place in the _____ market.
• Transaction in “Long-term marketable securities” take place in the ______ market.
•Money Market
•Capital Market
Involves the SALE of a NEW SECURITY directly to an investor or a group if investors.
Private Placement
____ ______ of securities, which is the SALE of either BONDS or STOCKS to the GENERAL PUBLIC.
Public Offering
The _________ is the financial market in which securities are INITIALLY ISSUED; The only market in which the issuer is directly involved in the transaction.
Primary Market
Pre-owned Securities are traded (Those that are not new issues)
Secondary Market
Created by a financial relationship between suppliers and demanders of SHORT-TERM FUNDS.
Money Market
Most money market transaction are made in _______ securities. (Short-term debt instruments)
•Investors generally consider it as the least risky ______ available.
Marketable
Least Risky Investment
International equivalent of the domestic money market is the __________ market.
Eurocurrency
All eurodollar deposits are ______ deposits.
Time
The key capital market securities are ______ (long term debt) and both common and ______ stock. (Equity or ownership)
Bonds
Preferred
______ are long term debt instruments used by businesses and government to raise large sums of money (from diverse group of lenders).
Bonds
______ are units of ownership interest or EQUITY in a corporation.
Common stock
_______ is a special form of ownership that has features a both a bond and common stock.
Preferred Stock
Greatest Investor.
Warren Buffet
_____ are securities exchange “The buyer and seller are brought together to trade securities”.
Broker Markets
_____ are markets which the buyer and seller are not brought together directly.
• As compensation for executing orders, market makers make money on the spread (Bid price-________)
Dealer Markets
Ask price
In the _______ market, corporations and governments typically issues bonds denominated in DOLLARS and sell them to investors located OUTSIDE THE US.
EuroBond
________ is a market for bonds issued by a foreign corporation or government that is dominated in the investor’s home market.
Foreign bond market
____ allows corporations to sell blocks of shares to investors in a number of different countries.
International Equity Market
From a firm’s perspective, the role of capital markets is to be a ______ market.
From the Investor’s perspective, the role of capital markets is to be and _____ market that allocates _____ to their most productive uses.
Liquid
Efficient market that allocates funds.
Advocates of _______ finance, an emerging field that blends ideas from finance and psychology.
Argue that _______ and prices of other securities can deviate from their true values for extended periods.
Behavior Finance
Stock
_____ is the process of pooling mortgages or other types of loans.
Securitization
_______ represents claims on the cash flows generated by a pool of mortgages that can be purchased by individual investors.
Mortgage-backed securities
Lenders relaxed standards for borrowers and created ______ mortgages.
Subprime
The price of banks stocks fell ___% between January 2008 and March 2009
81%
The Glass-Steagall act of 1933, established the ____ _____ ______ ______ which provides insurance for deposits at banks and monitor banks to ENSURE THEIR SAFETY AND SOUNDNESS.
Federal Deposit Insurance Corporation
