Term
|
Definition
Securities
Borrowers borrow funds directly from lenders in financial markets by selling them securities (financial instruments) which are claims on the borrower's future income or assets |
|
|
Term
|
Definition
| financial instruments which are claims on the borrower's future income or assets |
|
|
Term
| Securities are __ for te person who buys them but ___ for the individual or firm that sells them |
|
Definition
|
|
Term
|
Definition
| a debt security that promiseds to make payments periodically for a specified period of time |
|
|
Term
|
Definition
| security that entitles the owner to a share of the company's profits and assets |
|
|
Term
| Two ways to obtain funds in a financial market |
|
Definition
1. issue a debt instrument such as a bond or a mortgage which is a contractual agreementby the borrower to pay the holder of the instrument fixed dollar amounts at regular intervals (interest and principal payments) until a specfied date (the maturity date) when the final payment is made
2. by issuing equities such as common stock which are claims to share in the net income (income after expenses and taxes) and the assets of a business |
|
|
Term
| maturity of a debt instrument |
|
Definition
| number of years until that instrument's expiration date short term less than a year long term is greater than 10 yrs |
|
|
Term
|
Definition
| an equity holder-the corporation must pay all its debt holders before it pays its equity holders |
|
|
Term
|
Definition
| a financial market in which new issues of a security such as a bond or a stock are sold to initial buyers by the corporation or govt agency borrowing the funds |
|
|
Term
|
Definition
| a financial market in which securities that have been previously issued can be resold |
|
|
Term
| an important financial institution that ssists in the initial sale of securities in the primary market is the |
|
Definition
| investment bank which underwrites securities: it guarantees a price for a corporation's securities and sells them to the public |
|
|
Term
|
Definition
| guarantees a price for a corporation's securities and then sells them to the public |
|
|
Term
| Examples of secondary markets: |
|
Definition
| NYSE and NASDAQ ( bond market in which previously issued bonds of major corporations and the US govt are bought and sold 0larger trading volume) -foreign exchange markets, futures markets, and options markets |
|
|
Term
|
Definition
| agents of investors who match buyers w sellers of securities |
|
|
Term
|
Definition
| link buyers and sellers by buying and selling securities at state prices |
|
|
Term
|
Definition
| cost of borrowing or the price paid for the rental of funds |
|
|
Term
|
Definition
| where funds are converted from one currency into another |
|
|
Term
|
Definition
| price of one currency in terms of another currency |
|
|
Term
| foreign exchange market ___ the foreign exchange rate |
|
Definition
|
|
Term
|
Definition
| institutions that borrow funds from people who have saved and make loans to other people |
|
|
Term
|
Definition
| institutions that accepts deposits and makes loans |
|
|
Term
|
Definition
| ties changes in the money supply to changes in the aggregate economic activity and price level |
|
|
Term
| 2 functions of secondary markets |
|
Definition
1. they make it easier and quicker to sell these financial instruments to raise cash; that is they make the financial instruments more liquid
2. they determine the price of the security that the issuing firm sells in the primary market |
|
|
Term
|
Definition
| average price of goods and services in an economy |
|
|
Term
| prior to 1980 the rate of money growth and the interest rate on long term treasure bonds were |
|
Definition
closely tied
since then not so much |
|
|
Term
|
Definition
the management of the money supply and interest rates
conducted in the US by the federal reserve bank |
|
|
Term
|
Definition
| govt spending and taxation |
|
|
Term
|
Definition
| anything of durable value, such as land, people bonds etc |
|
|
Term
|
Definition
| an asset in physical form |
|
|
Term
|
Definition
| a direct or indirect claim against real assets |
|
|
Term
| secondary markets can be organized in 2 ways |
|
Definition
1. organize exchangers-where buyers and sellers of securities meet in one central location to ocnduct trade
2. OTC marker-dealers at different locations who have an inventory of securities stand ready to buy and sell securities to anyone who comes and is willing to accept their prices |
|
|
Term
| direct-claim financial asset example |
|
Definition
|
|
Term
|
Definition
| bond ( claim to future income arising from real assets of the bond issuer |
|
|
Term
|
Definition
| any market in which financial assets (either newly issued or previously existing are traded) |
|
|
Term
|
Definition
| any organization that provides financial services for its clients or members |
|
|
Term
| six functions of financial markets |
|
Definition
1. channel funds from savers to those w a shortage of funds
2. determination of asset prices
3. information aggregation and coordination
4. risk sharing
5. liquidity
6. efficiency |
|
|
Term
| money market versus capital market |
|
Definition
| markets determined on the basis of the maturity of the securities traded in each market |
|
|
Term
|
Definition
| financial market in which only short-term debt instruments (generally those w original maturity of less than 1 year ) are traded |
|
|
Term
|
Definition
| market in which longer-termdebt (generally those w original maturity of 1 year or greater and equity instruments are traded |
|
|
Term
| corporations and banks activly use the money market to earn interest on surplus funds that they expect to only have |
|
Definition
|
|
Term
| distinctive attributes of brokers (4) |
|
Definition
1. commissioned agent of a buyer or seller
2. facilitates trade by buyer seller matching
3. does not take a position in the assets he or she trades ( no inventory)
4. profits determined by commisssions |
|
|
Term
| distinctive attributes of dealers (3) |
|
Definition
facilitates trade by buyer-seller matching
can or does take positions in the assets he or she trades
3. makes profits by buying low and selling high |
|
|
Term
| investment bank attributes |
|
Definition
assists in Mergers and Acquisitions
Assists in IPOs the inital sale of newely issued securities by offering advice, underwriting, sales assistance |
|
|
Term
|
Definition
| debt instrument sold by a bank to depositors that pays annual interest of a given amount and at maturity pays back the original purchase price |
|
|
Term
|
Definition
| short-term debt instrument issued by large banks and well known corporations |
|
|
Term
|
Definition
| the base interst rate on corporate loans, an indicator of the cost of business borrowing from banks |
|
|
Term
|
Definition
| effectively short-term loans (less than 2 weeks) for which treasury bills serve as collateral |
|
|
Term
|
Definition
| the british banker's associate average of interbank rates for dollar deposits in london market |
|
|
Term
|
Definition
| the interest rate on US treasury bills, an indicator of general interest-rate movements |
|
|
