Professional Documents
Culture Documents
Financial Markets Institutions
Financial Markets Institutions
13th Edition
by Jeff Madura
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1 Role of Financial Markets and Institutions
Chapter Objectives
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2
Financial Market
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3 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Role of Financial Markets (1 of 3)
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4 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Role of Financial Markets (2 of 3)
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5 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Exhibit 1.1 How Financial Markets Facilitate
Corporate Finance and Investment Management
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6 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Role of Financial Markets (3 of 3)
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8 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Securities Traded in Financial Markets (2 of 7)
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10 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Securities Traded in Financial Markets (4 of 7)
Valuation of Securities
• Impact of information on valuation
• Estimate future cash flows by obtaining information
that may influence a stock’s future cash flows. (Exhibit
1.2)
• Use economic or industry information to value a
security.
• Use published opinions about the firm’s management
to value a security.
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11 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Securities Traded in Financial Markets (5 of 7)
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12 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Exhibit 1.2 Use of Information to Make
Investment Decisions
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13 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Securities Traded in Financial Markets (6 of 7)
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14 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Securities Traded in Financial Markets (7 of 7)
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16 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Role of Financial Institutions (2 of 6)
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18 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Role of Financial Institutions (4 of 6)
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19 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Exhibit 1.3 Comparison of Roles
among Financial Institutions
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20 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Role of Financial Institutions (5 of 6)
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21 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Exhibit 1.4 Summary of Institutional
Sources and Uses of Funds
FINANCIAL MAIN SOURCES OF FUNDS MAIN USES OF FUNDS
INSTITUTIONS
Commercial banks Deposits from households, businesses, Purchases of government and
and government agencies corporate securities; loans to
businesses and households
Savings institutions Deposits from households, businesses, Purchases of government and
and government agencies corporate securities; mortgages and
other loans to households; some
loans to businesses
Credit unions Deposits from credit union members Loans to credit union members
Finance companies Securities sold to households and Loans to households and businesses
businesses
Mutual funds Shares sold to households, businesses, Purchases of long-term government
and government agencies and corporate securities
Money market funds Shares sold to households, businesses, Purchases of short-term government
and government agencies and corporate securities
Insurance Insurance premiums and earnings from Purchases of long-term government
companies investments and corporate securities
Pension funds Employer/employee contributions Purchases of long-term government
and corporate securities
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22 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Role of Financial Institutions (6 of 6)
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23 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Exhibit 1.5 Organizational Structure of
a Financial Conglomerate
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Systemic Risk among Financial Institutions
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SUMMARY (2 of 3)
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SUMMARY (3 of 3)
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28 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.