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1、Part OneIntroductionChapter 1Why Study Financial Markets and Institutions?Copyright 2009 Pearson Prentice Hall. All rights reserved.1-3Chapter PreviewTo start, we preview subjects of interest to anyone who is a part of a productive society. We motivate how financial markets and institutions have sig
2、nificant impact on important questions about our financial well-being. Topics include:Why Study Financial Markets?Why Study Financial Institutions?Applied Managerial PerspectiveHow Will We Study Financial Markets and InstitutionsCopyright 2009 Pearson Prentice Hall. All rights reserved.1-4Why Study
3、Financial Markets?Financial markets, such as bond and stock markets, are crucial in our economy.1.These markets channel funds from savers to investors, thereby promoting economic efficiency.2.Market activity affects personal wealth, the behavior of business firms, and economy as a wholeCopyright 200
4、9 Pearson Prentice Hall. All rights reserved.1-5Why 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.We will briefly examine each of these markets, key statistics, and how
5、 we will examine them throughout this course.Copyright 2009 Pearson Prentice Hall. All rights reserved.1-6Why Study Financial Markets? Debt Markets & Interest RatesDebt markets, or bond markets, allow governments, corporations, and individuals to borrow to finance activities.In this market, borrower
6、s issue a security, called a bond, that promises the timely payment of interest and principal over some specific time horizon.The interest rate is the cost of borrowing.Copyright 2009 Pearson Prentice Hall. All rights reserved.1-7Why Study Financial Markets? Debt Markets & Interest RatesThere are ma
7、ny different types of market interest rates, including mortgage rates, car loan rates, credit card rates, etc.The level of these rates are important. For example, mortgage rates in the early part of 1983 exceeded 13%. Financing a house was quite expensive at this time.Copyright 2009 Pearson Prentice
8、 Hall. All rights reserved.1-8Why Study Financial Markets? Debt Markets & Interest RatesBecause interest rates are important to individuals and business, understanding the history of interest rates is beneficial.The next slide shows historical interest rates in various sectors of the bond market: Lo
9、ng-Term U.S. Government rates, Short-Term U.S. Government rates, and corporate rates.We will study these further in several chapters, examining the types and characteristics of bonds, as well as theories on how rates are determined.Copyright 2009 Pearson Prentice Hall. All rights reserved.1-9Bond Ma
10、rket and Interest RatesComplete list of interest rateshttp:/www.federalreserve.gov/releasesCopyright 2009 Pearson Prentice Hall. All rights reserved.1-10Why Study Financial Markets? The Stock MarketThe stock market is the market where common stock (or just stock), representing ownership in a company
11、, are traded.Companies initially sell stock (in the primary market) to raise money. But after that, the stock is traded among investors (secondary market).Of all the active markets, the stock market receives the most attention from the media, probably because it is the place where people get rich (a
12、nd poor) quickly.Copyright 2009 Pearson Prentice Hall. All rights reserved.1-11Why Study Financial Markets? The Stock MarketThe next slide shows the level of the Dow Jones Industrial Average over the last 55 years. Note how volatile stock prices have been, especially over the last five years.In futu
13、re chapters, we will examine the role of the stock market, as well as how prices react to information in the marketplace.Stock MarketCopyright 2009 Pearson Prentice Hall. All rights reserved.1-13Why Study Financial Markets? The Stock MarketCompanies, not just individuals, also watch the market. They
14、 often seek additional funding in equity markets after going public. The success of these seasoned-equity offerings (SEOs) is very dependent on the current price of the companys stock.Copyright 2009 Pearson Prentice Hall. All rights reserved.1-14Why Study Financial Markets? The Foreign Exchange Mark
15、etThe foreign exchange market is where international currencies trade and exchange rates are set.Although most people know little about this market, it has a daily volume around $1 trillion!View historical financial data and forecasts athttp:/www.forecasts.org/data/index.htmCopyright 2009 Pearson Pr
16、entice Hall. All rights reserved.1-15Why Study Financial Institutions?We will also spend considerable time discussing financial institutionsthe corporations, organizations, and networks that operate the so-called “marketplaces.” These institutions play a crucial role in improving the efficiency of t
17、he economy. We will look at:1.Central Banks and the Conduct of Monetary PolicyThe role of the Fed and foreign counterparts2.Structure of the Financial SystemHelps get funds from savers to othersCopyright 2009 Pearson Prentice Hall. All rights reserved.1-16Why Study Financial Institutions?3.Banks and
18、 Other Financial InstitutionsIncludes the role of insurance companies, mutual funds, pension funds, etc.4.Financial InnovationFocusing on the improvements in technology and its impact on how financial products are delivered5.Managing Risk in Financial InstitutionsFocusing on risk management in the f
19、inancial institution.Copyright 2009 Pearson Prentice Hall. All rights reserved.1-17Applied Managerial PerspectiveFinancial institutions are among the largest employers in the U.S. and often pay high salaries.Knowing how financial institutions are managed may help you better deal with them.Copyright
20、2009 Pearson Prentice Hall. All rights reserved.1-18Chapter SummaryWhy Study Financial Markets?: the three primary markets (bond, stock, and foreign exchange) were briefly introduced.Why Study Financial Institutions?: the market, institutions, and key changes affecting these were outlined.Copyright
21、2009 Pearson Prentice Hall. All rights reserved.1-19Chapter Summary (cont.)Applied Managerial Perspective: the book will often present material to better understand how actual managers use the information in daily operations.How We Will Study Financial Markets and Institutions: we outlines the three key components: analytical framework, features, and web exercises.
