2. FINANCIAL MARKETS
Funds are transferred from people with
excess funds to those with shortage
Promotes greater economic efficiency by
providing productive use for funds
3. FINANCIAL MARKETS
Well-functioning markets produce higher
economic growth
Has effects on personal wealth, behaviour
of businesses and consumers
Cyclical performance of the economy
4. SECURITY
Also called financial instrument
Claim on issuer’s future income or assets
(any financial claim or piece of property that
is subject to ownership)
5. DEBT MARKETS AND INTEREST RATES
Bond is a debt security that promises to
make payments periodically for a specified
period of time
Also known as bond market
6. DEBT MARKETS AND INTEREST RATES
Enable government and corporations to
borrow to finance their activities
Where interest rates are determined
Interest rate is the cost of borrowing or price
paid for rental funds
7. DEBT MARKETS AND INTEREST RATES
There are many different types of market
interest rates, including mortgage rates, car
loan rates, credit card rates, etc.
Interest rates are important at different
levels
8. DEBT MARKETS AND INTEREST RATES
On personal level, high interest rates deter
from spending but motivates savings
High interest rates might postpone
businesses’ investment decisions
9. DEBT MARKETS AND INTEREST RATES
Because changes in interest rates have
important effects on individuals, financial
institutions, businesses and overall
economy it is important to explain
fluctuations in interest rates
10. THE STOCK MARKET
A common stock represents a share of
ownership in a corporation
Has claim on the earnings and assets of the
corporation
In stock market, shares of stock are traded
11. THE STOCK MARKET
Fluctuations in stock prices affect the size of
people’s wealth and affect their willingness
to spend
Impact business investment decisions
Price of shares affects the amount of funds
that can be raised by selling newly issued
stock to finance investment spending
12. THE FOREIGN EXCHANGE MARKET
Conversion of one currency into another for
moving funds between countries takes
place
Change in exchange rate affects the cost of
imports and revenue from exports
13. WHY STUDY FINANCIAL MARKETS?
Financial markets, such as bond and stock
markets, are crucial in our economy.
These markets channel funds from savers
to investors, thereby promoting economic
efficiency.
Market activity affects personal wealth, the
behavior of business firms, and economy as
a whole
14. WHY STUDY FINANCIAL MARKETS?
Well functioning financial markets, such as
the bond market, stock market, and foreign
exchange market, are key factors in
producing high economic growth.
15. WHY STUDY FINANCIAL INSTITUTIONS?
Financial Institutions are the institutions that
make financial markets work
“Financial Institutions are the intermediaries,
that take funds from the people who save
and lend it to people who have productive
investment opportunities”.
