1. FINANCIAL MARKETS
CHAPTER 12.1

2. Objective:
Understand how financial systems work together to transfer savings to investors

3. Warm up Questions: May 3, 2017
What would happed if no one saved money for the future?

4. Savings and Capital Formation
Economic growth
Loans
Investments

6. Financial Assets and the Financial System
Network
Financial assets
Borrower
Financial intermediaries
Circular Flow
Government and business

8. Nonbank Financial Intermediaries
Savings
Installment contracts
Loan consolidation
Life insurance
Investing
Mutual funds
Pension funds
Real estate

9. What have you learned today about savings and the financial system?
Closure Question
What have you learned today about savings and the financial system?

13. Objective:
Understand how financial strategies and financial assets work in the real world

14. Warm up Questions: May 4, 2017
What should be taken into account when investing money?

16. Basic Investment considerations
High and low risk
Goals
Returns
Avoid
401 (k) plan

17. Bonds as Financial Assets
Three components
Supply and demand
Annual interest rate

18. Bond Rating
The general term for a long-term loan in which a borrower agrees to pay a lender an interest rate (usually fixed) over the length of the loan and then repay the principal at the date of maturity.
Ratings
D-AAA: virtually zero chance of a default (Blue chip companies : Exxon Mobil)
Default: failure to fulfill an obligation, especially to repay a loan

20. Financial Assets and Their Characteristics
Certificates of deposit
Corporate bonds
Municipal bonds
Saving bonds
Treasury notes
Treasury bills
IRA’s

21. Markets for Financial Assets
Capital markets: Capital markets are markets for buying and selling equity and debt instruments. Capital markets channel savings and investment between suppliers of capital such as retail investors and institutional investors, and users of capital like businesses, government and individuals.
Money markets: Money markets are used for a short-term basis, usually for assets up to one year. Conversely, capital markets are used for long-term assets, which are any asset with maturity greater than one year. Capital markets include the equity (stock) market and debt (bond) market.

22. Primary markets:The primary market is the part of the capital market that deals with issuing of new securities. Companies, governments or public sector institutions can obtain funds through the sale of a new stock or bond issues through primary market.
Secondary markets:A secondary market is a market where investors purchase securities or assets from other investors, rather than from issuing companies themselves. The national exchanges-such as the New York Stock Exchange and the NASDAQ are secondary markets.

25. Closure Question
What have you learned today about how financial strategies and financial assets work in the real world how financial strategies and financial? assets work in the real world

26. Warm up Questions: May 5, 2017
Why do some people believe it's impossible to always win in the stock market?

29. Market Efficiency
Efficient Market Hypothesis
Diversify portfolios

30. Organized Stock Exchanges
NYSE: 2,800 companies
AMEX: 750 companies
Regional stock exchanges
World stock exchanges

31. Over-the-Counter Market
OTC trades
NASADQ

32. Measures of Stock Performance
Dow-Jones Industrial Average
Standards & Poor
Bull vs. Bear market

33. Trading in the Future Spot market Futures market Future contracts
Options market
Call option
Put option

34. Closure Question
What have you learned today about how the stock market works? assets work in the real world