文档介绍：Money and Banking
Chapter 1Why Study Money, Banking, and Financial Markets?
Why study financial markets
Financial markets include the bond market, the stock market, and the foreign exchange market
Financial markets are places where funds are transferred from people who have an excess of available funds to people who have a shortage.
Financial markets are channeling funds from people who do not have a productive use for them to those who do, a process that results in greater economic efficiency.
Activities in financial markets have direct effects on personal wealth, the behavior of businesses and consumers, and the overall performance of the economy.
The bond market and interest rates
(1)A security (financial instrument) is a claim on the issuer’s future e or assets.
(2)A bond is a debt security that promises to make payments periodically for a specified period of time.
(3)The bond market allows corporations and governments to borrow to finance their activities and it is where interest rates are determined.
Interest rates
An interest rate is the cost of borrowing or the price paid for the rental of funds.
Interest rates affect consumers’ willingness to spend or save and businesses’ investment decisions.
It is important to understand how and why interest rates fluctuate.
The stock market
(1) A stock represents a share of ownership in a corporation.
(2) A stock is a security that is a claim on the earnings and assets of a corporation.
(3) A stock market is a place where corporations can raise funds for investment.
(4) The price of shares affects the amount of funds that can be raised by selling newly issued stock to finance investment spending.
The foreign exchange market
(1) The foreign exchange market is where the conversion of currency takes place in order to transfer funds from one country to another country.
(2) The foreign exchange rate is the price of one country’s currency in terms of another’s, which is determined in the foreign exchange market.