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Economics > Topic 5 - Financial Markets > Flashcards

Topic 5 - Financial Markets Flashcards

1
Q

Securities?

A

Any form of financial instrument, including shares and bonds, that provides the holder of that instrument with a claim over real assets or a future income stream

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2
Q

Primary financial markets?

A

The primary market is where securities are created. It’s in this market that firms sell (float) new stocks and bonds to the public for the first time. An initial public offering, or IPO, is an example of a primary market.

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3
Q

Secondary financial markets?

A

Involves transactions with financial assets that have already been issued on q primary market sometime in the past.

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4
Q

The share or equity market?

A

Where ownership shares in companies are issued or exchanged

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5
Q

The debt market:?

A

Where debt securities such as bonds are exchanged, or cash is lent and borrowed.

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6
Q

The derivatives market?

A

Where people buy and sell financial assets that are based on the value of other financial assets.

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7
Q

The foreign exchange market?

A

Where financial assets defined in one country’s currency are exchanged for assets defined in another country’s currency

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8
Q

Financial institutions?

A

Banks remain the largest and most important part of the financial sector but there are other financial institutions rising within in Australia to offer more competition to the market.

  • Finance companies
  • Investment banks
  • Credit unions
  • Permanent building societies
  • Mortgage originators
  • Superannuation funds
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9
Q
  1. type of financial product? credit
A

CREDIT is loans extended to individuals, businesses and government for spending on consumption and investments

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10
Q
  1. type of financial product? Housing loan
A

Housing loans - to purchase property, requiring periodic repayments with interests.

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11
Q
  1. type of financial product? Business loan
A

Business loans - debt that allows businesses to invest in their business operations.

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12
Q
  1. type of financial product? Short-term money market
A

Short-term money market - brings together people and businesses with temporary shortages or surpluses of funds.

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13
Q

Bonds ?

A

Longer-term securities for which lenders receive regular fixed payments from the issuing institution. Issued by government and a small number of companies and banks.

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14
Q

The ASX?

A

The Australian Securities Exchange is Australia’s primary securities exchange.

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15
Q

Role of the ASX?

A

Investment opportunities for individuals and businesses.

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16
Q

what does FLOAT mean ?

A

In economics, float is duplicate money present in the banking system during the time between a deposit being made in the recipient’s account and the money being deducted from the sender’s account.

17
Q

Foreign exchange markets?

A

Enables movement of funds around the world.

18
Q

Equity markets?

A

An equity market is a market in which shares of companies are issued and traded, either through exchanges or over-the-counter markets.

19
Q

What are the financial market regulations

A

Reserve bank of Australia (RBA)
Australian Prudential Regulation Authority (APRA)
Australian Securities and investment commission (ASIC)
Australian Treasury

20
Q

What is the RBA ?

A

RESERVE BANK AUSTRALIA

Responsible for monetary policy, payment system regulation, and the stability of the financial system

21
Q

What is the APRA?

A

Responsible for prudential supervision and regulation of all deposit-taking institutions, life and general insurance, and superannuation funds

22
Q

What is the ASIC?

A

Responsible for corporate regulation, consumer protection and oversight of financial services product

23
Q

What is the Australian Treasury?

A

Advises the government on financial stability issues and the framework for the financial system

24
Q

Business factors that affect demand for funds ?

A

Does the business have enough liquidity to cover expenses?
Economic conditions?
The level of interests rates.

25
Q

Money supply?

A

Is the total amount of funds in an economy that can be used as a medium of exchange, a measure of value, a store value and a method of deferred payment.

26
Q

Interest rates?

A

difference between the borrowing rate and the lending rate

27
Q

What are the factors affecting supply and demand of funds which will affect interest rates.

A
  • Demand for capital goods
  • The amount of savings in the economy
  • Demand for liquid funds
28
Q

The RBA and CASH RATE?

A

The cash rate is the interest rate in a fundamental market called the ‘overnight money market’. This is the market for very short-term loans between banks, where loans are literally made for overnight use in many cases.

29
Q

The overnight money market?

A
  • Exchange settlement accounts
  • Policy interest rate corridor
  • Open market operations

Economics (6 decks)

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