Questions On Financial Institutions And Markets

Page 3: Introduction to the Financial System Page 7: Commercial Banks Page 12: The Share Market and the Corporation Page 15: Corporations Issuing Equity into the Share Market Page 19: Investors in the Share Market Page 24: Short-term Debt Page 28: Medium- to Long-term Debt Page 32: Interest Rate Determination and Forecasting Page 37: The Foreign Exchange Market Page 40: Factors that Influence the Exchange Rate Page 42: Futures Contracts and Forward Rate Agreements Page 47: Options

1. The financial choices we make impact our economy. Think of a recent item you purchased. What factors influenced your decision in making this purchase? Did this purchase impact your local economy? Explain why or why not.

AGENDA 1. 2. 3. 4. 5. Announcements Financial Markets and Net Present Value Survey Results Optional Material (e.g. Cases, Practical

Looking to build on the successful model and expand their operations in July 2004, JB Hi Fi bought the Clive Anthony chain of retail stores who competed in the same retail space.

| The hypothesis that market prices reflect all publicly available information is called efficiency in the:Answer

The collapse of Lehman Brothers, a sprawling global bank, in September 2008 almost brought down the world’s financial system. Considered by many economists to have been the worst financial crisis since the Great depression of the 1930s. Economist Peter Morici coined the term the “The Great Recession” to describe the period. While the causes are still being debated, many ramifications are clear and include the failure of major corporations, large declines in asset values (some estimates put the drop in the trillions of dollars range), substantial government intervention across the globe, and a significant decline in economic activity. Both regulatory and market based solutions have been proposed or executed to attempt to combat the causes and effects of the crisis.

The financial crisis of 2007 and 2009 was the worst since the great depression. It was not a single event but a series of crises whose seeds had been planted in yet another recession of 2001 and the era of the internet bubble years earlier (Bodie, Kane, & Marcus, 2011). One of the reasons for the crisis was the rise in subprime lending. Subprime loans were offered to individuals who did not qualify for prime rate loans and carried a higher rate of interest than prime loans (Gilbert, 2011). Another reason behind the subprime mortgage crisis is argued to have been due to the lack of ethics and poor policies such as the Goldman rule which encouraged pursuit of profitable opportunities irrespective of the effects on others (Watkins, 2011). In this paper, I will briefly define financial markets, outline types of financial markets and orders and trading mechanisms in

BUS 430 Prof. Sara Ding International Financial Management Spring 2013 Instructions: Answer all questions in Part A, Part B, and Part C. Write your answers for Part A on the next page and write your answers for Part B and Part C in the space provided below the question. You may use one page (double sided) of notes and a financial calculator, but no other materials.

Leading central banks around the world assisted in regaining the financial system and bringing the economy back to good terms at the peak of the financial crisis. Together they helped stop the financial system from upturning, and with tremendous effort, helped reestablish financial and economic stability. The United States’ central bank is known as the Federal Reserve, and they are accountable for making sure the country’s financial system functions effortlessly. During the crisis of 2007-2009 the Federal Reserve was passive and did not take the lengths necessary to help stop or slow down the upcoming crisis. Throughout this paper I will discuss what steps were taken and what steps should have been taken to help the United States during this time of financial instability.

In his book, “Diary of a very bad year: Confessions of an anonymous hedge fund manager”, Keith Gessen provides a captivating, entertaining and a shocking account of the 2008 financial crisis. The 2008 financial crisis is described as the deepest dives and the steepest recovery of a catastrophic mortgage crisis. The analysis will incorporate the “Efficient market hypothesis.” In addition, the analysis explains the concept of “financialization of markets.” The confessions of the hedge fund manager debunk the theory of rational markets. In addition, rational reasoning is a trait certainly absent in the financial sector. The absence of logical reasoning in the financial sector is to be blamed for leading the economy down the path of utter chaos and destruction instead of steering towards a more prosperous, less economically fickle future. Lastly, examine the role of the government in bailing out the financial sector.

Three greater substances light up the strange and troubling money related issues for America from the alarming 2008 crash and its outcome. In any case: for U.S. budgetary and regard markets, there has beginning now on an extremely fundamental level been a full recuperation from the Great Recession. Key pointers of execution for these business sections the Dow30, S&P500, Russell 2000, NASDAQ, etc.–are all at higher obvious levels today than they were five years back. Undoubtedly, even in the wake of controlling for swelling, these markers are before where they were in mid-2008. For riches holders in these business parts, the dreadful dream is over-in any event for the present The story for the genuine economy-where unmistakable stock and

This document is authorized for use only by Yen Ting Chen in FInancial Markets and Institutions taught by Nawal Ahmed Boston University from September 2014 to December 2014.

This paper will encompass the importance of the U.S stock market/stock exchange versus the Chinese stock market/ stock exchange, with a brief introduction about how each stock market/stock exchange came into existence, the importance of each stock market/stock exchange, how the U.S and Chinese manage their stock markets/stock exchange, how corporations are appointed plus the rules and regulations. This will also entail random facts about each stock market/stock exchange. Stock markets are like hitting a royal flush, if the price of your stocks goes up, you win; if it drops, you lose! The stock market, also known as the fairness market, is one in which shares are owned by companies and their shareholders. The companies that are on the stock market, its stocks are issued and traded publicly, through either exchanges or over-the-counter markets. The stock market is considered to be one of the most critical components of a gratuitous-market economy that provides companies with access to dominance in exchange for giving investor’s the opportunity to have some type of possession of the company. The stock market gives those the power to invest monies, and to capitalize on their gains. This in return can bring about wealth to some without having to take a financial risk in starting up a new business.

Stock markets are a central component to the functioning of a capitalist economy. All major economies have national stock markets and many economies have smaller markets as well in order to facilitate trade in small cap stocks, or other specialized securities such as derivatives. Sometimes the performance of a stock market is used in the media as a measure of economic performance, as the market is deemed to be comprised of rational economic actors whose actions are guided by high levels of knowledge. It is important for everybody to understand how stock markets work, and what the benefits and limitations are of using stock markets as a gauge of economic performance.

A financial intermediary, by definition, is responsible for the process of transferring money from economic agents with a surplus of funds to economic agents with a deficit of funds, and is known as financial intermediation. This is achieved by means of a financial security, such as stocks and bonds. The mechanism that allows the trade of such financial securities is known as a financial market. Financial markets aim to facilitate the raising of capital, as well as the transfer of risk between economic agents and also international trade. Typically, the borrower will issue a receipt, or financial security, to the lender that promises to pay back the capital gained. Securities such as these can be freely bought or sold within financial