2. Unit 12.1AMoney and financial institutions Unit 12.1BThe role of government in the macro-economy Unit 12.2AMacroeconomic equilibrium Unit 12.2BEconomic stability Unit 12.3AInternational trade and the global economy Unit 12.3BForeign exchange markets Unit 12.4AKazakhstan and the world economy Unit 12.4BIntegration and globalisation

3. Money and financial institutions WEEK 1:The functions of money WEEK 2:The role of banks in a modern economy WEEK 3:Types of financial investment

4. the meaning of financial Institution and financial assets. Discuss the nature and types of financial institutions. Describe the strengths and weakness of various financial instruments. Characteristics of bonds and stocks. Risk and return for stocks and bonds – (Why is it important to have both in a portfolio? What is diversification in the context of portfolio risk management?) Financial vs. real assets. Characteristics and examples. Liquidity Risk vs. return relationship in relation to financial assets. Describe importance of and link between real and financial assets. Note, there is a second slide show with this, this is part 1.

5. Definition: Financial Institution - An establishment that focuses on dealing with financial transactions, such as investments, loans and deposits. Conventionally, financial institutions are composed of organizations such as banks, trust companies – other courtries. insurance companies and investment dealers.

6. We Must Now DEFINE These terms…

7. What’s a transaction? “Trans” From latin- "across", "beyond" or "on the other side" “Action” “to do a something” Пример: Walking, running dancing – these are all actions. "С другой стороны"

8. What’s a transaction? ‪ сделка ‬, ‪ ведение дела ‬, ‪ ведение ‬, ‪ дело ‬, ‪ трансак ция ‬, ‪ урегулиро вание спора ‬

9. To invest – “To commit “give” (money or capital) in order to gain a financial return” I invested my money in the bank hoping to earn some interest. I invested all my money in companies before the ‘Global financial crisis’ – Now I have nothing left.

10. To loan - “The act of giving money, property or other material goods to a another party in exchange for future repayment ” “To repay is to pay someone back later” “ Goods are things” “ Another party is another person or entity лицо (like a company)” юридическое лицо ‪ возвращать ‬, ‪ воз давать ‬, ‪ отдават ь долг ‬, ‪ платить

11. To loan - “You must always repay your debts! ”

12. To deposit - “To put your money into a bank” “Every week my wages are deposited into my personal bank account”

14. We know what a bank is, but what is an insurance company? An insurance company takes money from customers and pays money back when/ if there is a claim. For example: “Today I crashed my car into a tree but luckily I can make a claim on my insurance policy”

15. Insurance companies make money by charging fees for their insurance policies. Insurance companies lose some money when they have to payout for a claim. Insurance companies must assess the risk of each customer in order to decide on the fee they charge. For example, if the risk of a claim is low the insurance fee will also be low. However, if the risk of a claim is high the fee will also need to be high in order for the insurance company to make money. Insurance companies rely on the fact that ONLY SOME of their customer will make claims at any given time. If ALL of their customers make claims at the same the, the insurer will have significant financial difficulty!

16. Insurance company? The insurance policy is the legal document which describes the circumstance(s) in which a claim must be paid.

17. Types of insurance companies? Life insurance

18. Types of insurance companies? health insurance

19. Types of insurance companies? Mortgage insurance If you can’t repay the bank you have the protection of your morgate insurance…

20. Types of insurance companies? Mortgage insurance cont… Many banks will not lend you money unless you have mortgage insurance Why? Because the worry that you may not repay the loan

21. Definition: financial asset - An asset that derives value because of a contractual claim. Definition: physical asset - An asset that has physical, tangible worth, Like land, property, a car, a machine, equipment, etc. Unlike land and property--which are tangible, physical assets-- financial assets do not necessarily have physical worth. Their physical worth is merely the value of the paper on which they are printed.

22. Financial asset: Physical asset: No physical worth, simply a document Examples: land, property, a car, a machine, equipment, etc. Examples: A stock, A bond, Bank account, etc

23. 1. Financial asset: 2. Physical asset: No physical worth, simply a document These have physical worth.

24. Definition: A financial asset - A bond is legal document (piece of paper). On this paper a contract is Described. It’s a debt instrument that a government or a company issues to raise money. Basically it is a contract between a government or a company—who is acting as the borrower—and investors like you—who are acting as the lender.

25. When you buy a bond, you are lending money to the government or a company which issued the bond, and in return, the government or company agrees to pay your money back, with interest, at some point in the future. You are the creditor, and the other party is the borrower. The bond document states: 1 – the interest you will be paid for the loan 2 – the life of the bond (the date of maturity, e.g. 6 months)

26. For example: A bond may have a life of 2 years and a return of 7% (Called a coupon rate): January 1:Regular interest dateBond MATURITY DATE. You pay $100 You get $7 You get $7 (face value of bond)Regular interestRegular interest You get $100 (face value) Bond maturity Jan 1, 2014Jan 1, 2015Jan 1, 2016 Invest: $100 Return: $7 Return: $107

27. Definition: A Loan- A loan is legally binding agreement Between two parties. Stipulating the amount of the loan The interest rate And the life of the loan And the amount and time of The repayments It’s a debt instrument that is used by individuals, government and companies in order to purchase goods and services. Examples: Car loan, home loan, personal load, business loan, government foreign debt, etc.