Summary: The Practice Of Financial Markets

Read the summary and the most important questions on The Practice of Financial Markets

• Chapter 1

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• What are financial markets

  Markets in which funds are transferred from people who have an excess of available funds to people who have a shortage

• For what are financial markets crucial?

  To promoting greater economic efficiency by channeling funds from people who do not have the productive use for them to those who do

• Financial market activities have direct effects on

  personal wealth, behaviour of business and consumers, and the cyclical performance of the economy

• What is a bond

  A debt security that promises to make payments periodically for a specified period of time

• What is an interest rate

  The cost of borrowing or the price paid for the rental funds

• What means a high interest rate on personal level?

  Cost of financing would be high and it coult encourage you to save more because you can earn more interest

• On what has the interest rate an impact on more general level?

  On the overall health of the economy, because it affect not only consumers' willingness to spend or save but also business' investment decisions.

• Why is the stock market also simply called the market?

  Because the claims traded in the stock market are the most widely followed financial market. Almost every country has one.

• Why is the stock market an important factor in business investment decisions?

  Because the price of shares affects the amount of funds that can be raised by selling newly issued stock to finance investment spending. A higher price for a firm's shares means that it can raise a larger amount of funds.

• What is the most important financial institution?

  The central bank, this is the government agency responsible for the conduct of monetary policy