lOMoAR cPSD| 32110785
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Downloaded by Vincent Cosmas ()
, lOMoAR cPSD| 32110785
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CHAPTER 1: WHY STUDY MONEY, BANKING AND
FINANCIAL MARKETS
Why study financial markets?
Securities - a claim on the issuer’s future income or assets
that is sold by a borrower to a lender. Securities may also
be referred to as financial instruments. Financial
instruments may be divided into two main categories:
money market instruments (e.g. Negotiable Certificate of
Deposit (NCDs), Commercial Papers; Retirement Annuity
(RAs) and Bankers Acceptance (Bas)) and capital market
instruments (e.g. bonds and shares).
Bonds - a specific type of security, namely a debt security
that promises to make payments periodically for a
specified period of time.
Interest rate - cost of borrowing or the price paid for the
rental of funds. “The” interest rate is made up of a number
of different interest rates that exist in an economy. E.g.
mortgage, car loan etc
Bond Market is especially important to economic activity
because it enables corporations and governments to borrow
to finance their activities and it is where interest rates are
determined.
Downloaded by Vincent Cosmas
()
1
Downloaded by Vincent Cosmas ()
, lOMoAR cPSD| 32110785
2
CHAPTER 1: WHY STUDY MONEY, BANKING AND
FINANCIAL MARKETS
Why study financial markets?
Securities - a claim on the issuer’s future income or assets
that is sold by a borrower to a lender. Securities may also
be referred to as financial instruments. Financial
instruments may be divided into two main categories:
money market instruments (e.g. Negotiable Certificate of
Deposit (NCDs), Commercial Papers; Retirement Annuity
(RAs) and Bankers Acceptance (Bas)) and capital market
instruments (e.g. bonds and shares).
Bonds - a specific type of security, namely a debt security
that promises to make payments periodically for a
specified period of time.
Interest rate - cost of borrowing or the price paid for the
rental of funds. “The” interest rate is made up of a number
of different interest rates that exist in an economy. E.g.
mortgage, car loan etc
Bond Market is especially important to economic activity
because it enables corporations and governments to borrow
to finance their activities and it is where interest rates are
determined.
Downloaded by Vincent Cosmas
()
