8th Editio
mk
n
I. SOLUTION MANUAL FOR
II. Financial Markets And Institutions 8th Edition Anthony Saunders
III.
IV. Part I
V. Introduction and Overview of Financial Markets
VI.
VII. Chapter One Introduction
VIII. Chapter Outline mk
1. Why Study Financial Markets and Institutions? Chapter Overview
mk mk mk mk mk mk mk
2. Overview of Financial Markets
mk mk mk
a. Primary Markets versus Secondary Markets
mk mk mk mk
b. Money Markets versus Capital Markets
mk mk mk mk
c. Foreign Exchange Markets mk mk
d. Derivative Security Markets mk mk
e. Financial Market Regulation mk mk
3. Overview of Financial Institutions
mk mk mk
a. Unique Economic Functions Performed by Financial Institutions
mk mk mk mk mk mk
b. Additional Benefits FIs Provide to Suppliers of Funds
mk mk mk mk mk mk mk
c. Economic Functions FIs Provide to the Financial System as a Whole
mk mk mk mk mk mk mk mk mk mk
d. Risks Incurred by Financial Institutions
mk mk mk mk
e. Regulation of Financial Institutions mk mk mk
f. Trends in the United States
mk mk mk mk
4. Globalization of Financial Markets and Institutions
mk mk mk mk mk
Appendix 1A: The Financial Crisis: The Failure of Financial Institutions‘ Specialnes
mk mk mk mk mk mk mk mk mk mk
s (available through McGraw Hill‘s Connect. Contact your McGraw Hill representativ
mk mk mk mk mk mk mk mk mk mk
e for more information on making the appendix available to your students).
mk mk mk mk mk mk mk mk mk mk mk
IX. Learning Goals mk
1. Differentiate between primary and secondary markets.
mk mk mk mk mk
2. Differentiate between money and capital markets.
mk mk mk mk mk
3. Understand what foreign exchange markets are.
mk mk mk mk mk
4. Understand what derivative securities markets are.
mk mk mk mk mk
5. Distinguish between the different types of financial institutions.
mk mk mk mk mk mk mk
6. Know the services financial institutions perform.
mk mk mk mk mk
7. Know the risks financial institutions face.
mk mk mk mk mk
8. Appreciate why financial institutions are regulated.
mk mk mk mk mk
9. Recognize that financial markets are becoming increasingly global.
mk mk mk mk mk mk mk
Copyright © 2022 McGraw Hill Education. All rights reserved. No reprodu
mk mk mk mk mk mk mk mk mk mk
ction or distribution without the prior written consent of McGraw Hill.
mk mk mk mk mk mk mk mk mk mk
1-1
, 8th Editiomk
n
X. Chapter in Perspective mk mk
This chapter has three major sections and one minor section. The text provid
mk mk mk mk mk mk mk mk mk mk mk mk
es a general overview of the major types of U.S. financial markets, focusing primari
mk mk mk mk mk mk mk mk mk mk mk mk mk
ly on terminology and descriptions of the major securities, market structures and reg
mk mk mk mk mk mk mk mk mk mk mk mk
ulators. Market microstructure is not discussed. Foreign exchange transactions are als
mk mk mk mk mk mk mk mk mk mk
o briefly introduced. Second, the chapter describes the various types of financial inst
mk mk mk mk mk mk mk mk mk mk mk mk
itutions and explains the risks they face and the services they provide to funds‘ user
mk mk mk mk mk mk mk mk mk mk mk mk mk mk
s and funds‘ suppliers. The financial crisis is discussed and the impact of Brexit is
mk mk mk mk mk mk mk mk mk mk mk mk mk mk mk
considered. The final section of the chapter provides statistics about the rapid growt
mk mk mk mk mk mk mk mk mk mk mk mk
h of globalization of both markets and institutions. An appendix covering the details
mk mk mk mk mk mk mk mk mk mk mk mk mk
of the financial crisis and the government intervention programs, including the costs
mk mk mk mk mk mk mk mk mk mk mk mk
as of late 2009, is available through McGraw Hill‘s Connect. Contact your McGraw
mk mk mk mk mk mk mk mk mk mk mk mk
mkHill representative for more information on making the appendix available to your
mk mk mk mk mk mk mk mk mk mk mk mk
students.
XI. Key Concepts and Definitions to Communicate to Students
mk mk mk mk mk mk mk
Financial markets mk Primary markets mk
Initial public offerings (IPO)
mk mk mk Secondary markets mk
Derivative security mk Liquidity
Money markets mk Over-the-counter (OTC) markets mk mk
Capital markets mk Derivative security markets mk mk
Financial institutions mk Direct transfer mk
Price risk mk Indirect transfer mk
Delegated monitor mk Asset transformers mk
Diversify Economies of scale mk mk
Enterprise risk management (ERM)mk mk mk
Appendix terms include: mk mk
TARP Federal Reserve Rescue Efforts
mk mk mk
Federal Stimulus programs
mk mk American International Group mk mk
FDIC Bank takeovers
mk mk
Other financial initiative
mk mk
Copyright © 2022 McGraw Hill Education. All rights reserved. No reprodu
mk mk mk mk mk mk mk mk mk mk
ction or distribution without the prior written consent of McGraw Hill.
mk mk mk mk mk mk mk mk mk mk
1-1
, 8th Editio
mk
n
s Other housing initiatives
mk mk mk
Copyright © 2022 McGraw Hill Education. All rights reserved. No reprodu
mk mk mk mk mk mk mk mk mk mk
ction or distribution without the prior written consent of McGraw Hill.
mk mk mk mk mk mk mk mk mk mk
1-1
, 8th Editio
mk
n
XII. Teaching Notes mk
a. Why Study Financial Markets and Institutions?
mk mk mk mk mk
For an economy to achieve its potential growth rate, mechanisms must exist
mk mk mk mk mk mk mk mk mk mk mk m
kto effectively allocate capital (a scarce resource) to the best possible uses while acc
mk mk mk mk mk mk mk mk mk mk mk mk mk
ounting for the riskiness of the opportunities available. Markets and institutions have
mk mk mk mk mk mk mk mk mk mk mk mk
been created to facilitate transfers of funds from economic agents with surplus fund
mk mk mk mk mk mk mk mk mk mk mk mk
s to economic agents in need of funds. For an economy to maximize its growth po
mk mk mk mk mk mk mk mk mk mk mk mk mk mk mk
tential it must create methods that attract savers‘ excess funds and then put those f
mk mk mk mk mk mk mk mk mk mk mk mk mk mk
unds to the best uses possible, otherwise idle cash is not used as productively as p
mk mk mk mk mk mk mk mk mk mk mk mk mk mk mk
ossible. The funds transfer should occur at as low a cost as possible to ensure max
mk mk mk mk mk mk mk mk mk mk mk mk mk mk mk
imum economic growth. Two competing alternative methods exist: direct and indire
mk mk mk mk mk mk mk mk mk mk
ct financing. In direct financing the ultimate funds supplier purchases a claim from
mk mk mk mk mk mk mk mk mk mk mk mk mk
the funds demander with or without the help of an intermediary such as an underw
mk mk mk mk mk mk mk mk mk mk mk mk mk mk
riter. In this case, society relies on primary markets to initially price the issue and
mk mk mk mk mk mk mk mk mk mk mk mk mk mk
mkthen secondary markets to update the prices and provide liquidity. Trustees are a
mk mk mk mk mk mk mk mk mk mk mk mk
ppointed to monitor contractual obligations of issuers and instigate enforcement acti
mk mk mk mk mk mk mk mk mk mk
ons for breach of contract terms. In indirect financing, the funds demander obtains
mk mk mk mk mk mk mk mk mk mk mk mk mk
financing from a financial intermediary. The intermediary and the borrower negotiat
mk mk mk mk mk mk mk mk mk mk
e the terms and cost. The intermediary obtains funds by offering different claims to
mk mk mk mk mk mk mk mk mk mk mk mk mk
mkfund suppliers. In this case the intermediary is usually responsible for monitoring t
mk mk mk mk mk mk mk mk mk mk mk mk
he contractual conditions of the financing agreement and perhaps updating the cost
mk mk mk mk mk mk mk mk mk mk mk mk
if appropriate.
mk
Copyright © 2022 McGraw Hill Education. All rights reserved. No reprodu
mk mk mk mk mk mk mk mk mk mk
ction or distribution without the prior written consent of McGraw Hill.
mk mk mk mk mk mk mk mk mk mk
1-2
mk
n
I. SOLUTION MANUAL FOR
II. Financial Markets And Institutions 8th Edition Anthony Saunders
III.
IV. Part I
V. Introduction and Overview of Financial Markets
VI.
VII. Chapter One Introduction
VIII. Chapter Outline mk
1. Why Study Financial Markets and Institutions? Chapter Overview
mk mk mk mk mk mk mk
2. Overview of Financial Markets
mk mk mk
a. Primary Markets versus Secondary Markets
mk mk mk mk
b. Money Markets versus Capital Markets
mk mk mk mk
c. Foreign Exchange Markets mk mk
d. Derivative Security Markets mk mk
e. Financial Market Regulation mk mk
3. Overview of Financial Institutions
mk mk mk
a. Unique Economic Functions Performed by Financial Institutions
mk mk mk mk mk mk
b. Additional Benefits FIs Provide to Suppliers of Funds
mk mk mk mk mk mk mk
c. Economic Functions FIs Provide to the Financial System as a Whole
mk mk mk mk mk mk mk mk mk mk
d. Risks Incurred by Financial Institutions
mk mk mk mk
e. Regulation of Financial Institutions mk mk mk
f. Trends in the United States
mk mk mk mk
4. Globalization of Financial Markets and Institutions
mk mk mk mk mk
Appendix 1A: The Financial Crisis: The Failure of Financial Institutions‘ Specialnes
mk mk mk mk mk mk mk mk mk mk
s (available through McGraw Hill‘s Connect. Contact your McGraw Hill representativ
mk mk mk mk mk mk mk mk mk mk
e for more information on making the appendix available to your students).
mk mk mk mk mk mk mk mk mk mk mk
IX. Learning Goals mk
1. Differentiate between primary and secondary markets.
mk mk mk mk mk
2. Differentiate between money and capital markets.
mk mk mk mk mk
3. Understand what foreign exchange markets are.
mk mk mk mk mk
4. Understand what derivative securities markets are.
mk mk mk mk mk
5. Distinguish between the different types of financial institutions.
mk mk mk mk mk mk mk
6. Know the services financial institutions perform.
mk mk mk mk mk
7. Know the risks financial institutions face.
mk mk mk mk mk
8. Appreciate why financial institutions are regulated.
mk mk mk mk mk
9. Recognize that financial markets are becoming increasingly global.
mk mk mk mk mk mk mk
Copyright © 2022 McGraw Hill Education. All rights reserved. No reprodu
mk mk mk mk mk mk mk mk mk mk
ction or distribution without the prior written consent of McGraw Hill.
mk mk mk mk mk mk mk mk mk mk
1-1
, 8th Editiomk
n
X. Chapter in Perspective mk mk
This chapter has three major sections and one minor section. The text provid
mk mk mk mk mk mk mk mk mk mk mk mk
es a general overview of the major types of U.S. financial markets, focusing primari
mk mk mk mk mk mk mk mk mk mk mk mk mk
ly on terminology and descriptions of the major securities, market structures and reg
mk mk mk mk mk mk mk mk mk mk mk mk
ulators. Market microstructure is not discussed. Foreign exchange transactions are als
mk mk mk mk mk mk mk mk mk mk
o briefly introduced. Second, the chapter describes the various types of financial inst
mk mk mk mk mk mk mk mk mk mk mk mk
itutions and explains the risks they face and the services they provide to funds‘ user
mk mk mk mk mk mk mk mk mk mk mk mk mk mk
s and funds‘ suppliers. The financial crisis is discussed and the impact of Brexit is
mk mk mk mk mk mk mk mk mk mk mk mk mk mk mk
considered. The final section of the chapter provides statistics about the rapid growt
mk mk mk mk mk mk mk mk mk mk mk mk
h of globalization of both markets and institutions. An appendix covering the details
mk mk mk mk mk mk mk mk mk mk mk mk mk
of the financial crisis and the government intervention programs, including the costs
mk mk mk mk mk mk mk mk mk mk mk mk
as of late 2009, is available through McGraw Hill‘s Connect. Contact your McGraw
mk mk mk mk mk mk mk mk mk mk mk mk
mkHill representative for more information on making the appendix available to your
mk mk mk mk mk mk mk mk mk mk mk mk
students.
XI. Key Concepts and Definitions to Communicate to Students
mk mk mk mk mk mk mk
Financial markets mk Primary markets mk
Initial public offerings (IPO)
mk mk mk Secondary markets mk
Derivative security mk Liquidity
Money markets mk Over-the-counter (OTC) markets mk mk
Capital markets mk Derivative security markets mk mk
Financial institutions mk Direct transfer mk
Price risk mk Indirect transfer mk
Delegated monitor mk Asset transformers mk
Diversify Economies of scale mk mk
Enterprise risk management (ERM)mk mk mk
Appendix terms include: mk mk
TARP Federal Reserve Rescue Efforts
mk mk mk
Federal Stimulus programs
mk mk American International Group mk mk
FDIC Bank takeovers
mk mk
Other financial initiative
mk mk
Copyright © 2022 McGraw Hill Education. All rights reserved. No reprodu
mk mk mk mk mk mk mk mk mk mk
ction or distribution without the prior written consent of McGraw Hill.
mk mk mk mk mk mk mk mk mk mk
1-1
, 8th Editio
mk
n
s Other housing initiatives
mk mk mk
Copyright © 2022 McGraw Hill Education. All rights reserved. No reprodu
mk mk mk mk mk mk mk mk mk mk
ction or distribution without the prior written consent of McGraw Hill.
mk mk mk mk mk mk mk mk mk mk
1-1
, 8th Editio
mk
n
XII. Teaching Notes mk
a. Why Study Financial Markets and Institutions?
mk mk mk mk mk
For an economy to achieve its potential growth rate, mechanisms must exist
mk mk mk mk mk mk mk mk mk mk mk m
kto effectively allocate capital (a scarce resource) to the best possible uses while acc
mk mk mk mk mk mk mk mk mk mk mk mk mk
ounting for the riskiness of the opportunities available. Markets and institutions have
mk mk mk mk mk mk mk mk mk mk mk mk
been created to facilitate transfers of funds from economic agents with surplus fund
mk mk mk mk mk mk mk mk mk mk mk mk
s to economic agents in need of funds. For an economy to maximize its growth po
mk mk mk mk mk mk mk mk mk mk mk mk mk mk mk
tential it must create methods that attract savers‘ excess funds and then put those f
mk mk mk mk mk mk mk mk mk mk mk mk mk mk
unds to the best uses possible, otherwise idle cash is not used as productively as p
mk mk mk mk mk mk mk mk mk mk mk mk mk mk mk
ossible. The funds transfer should occur at as low a cost as possible to ensure max
mk mk mk mk mk mk mk mk mk mk mk mk mk mk mk
imum economic growth. Two competing alternative methods exist: direct and indire
mk mk mk mk mk mk mk mk mk mk
ct financing. In direct financing the ultimate funds supplier purchases a claim from
mk mk mk mk mk mk mk mk mk mk mk mk mk
the funds demander with or without the help of an intermediary such as an underw
mk mk mk mk mk mk mk mk mk mk mk mk mk mk
riter. In this case, society relies on primary markets to initially price the issue and
mk mk mk mk mk mk mk mk mk mk mk mk mk mk
mkthen secondary markets to update the prices and provide liquidity. Trustees are a
mk mk mk mk mk mk mk mk mk mk mk mk
ppointed to monitor contractual obligations of issuers and instigate enforcement acti
mk mk mk mk mk mk mk mk mk mk
ons for breach of contract terms. In indirect financing, the funds demander obtains
mk mk mk mk mk mk mk mk mk mk mk mk mk
financing from a financial intermediary. The intermediary and the borrower negotiat
mk mk mk mk mk mk mk mk mk mk
e the terms and cost. The intermediary obtains funds by offering different claims to
mk mk mk mk mk mk mk mk mk mk mk mk mk
mkfund suppliers. In this case the intermediary is usually responsible for monitoring t
mk mk mk mk mk mk mk mk mk mk mk mk
he contractual conditions of the financing agreement and perhaps updating the cost
mk mk mk mk mk mk mk mk mk mk mk mk
if appropriate.
mk
Copyright © 2022 McGraw Hill Education. All rights reserved. No reprodu
mk mk mk mk mk mk mk mk mk mk
ction or distribution without the prior written consent of McGraw Hill.
mk mk mk mk mk mk mk mk mk mk
1-2
