AnOverviewoftheFinancialSystem(英文版的教程).pptx

AnOverviewoftheFinancialSystem(英文版的教程)Chapter 2An Overview of the Financial System2.1 Function of Financial MarketsPerform the essential function of channeling funds from economic players that have saved surplus funds to those that have a shortage of fundsDirect finance: borrowers borrow funds directly from lenders in financial markets by selling them securities. FIGURE 1 Flows of Funds Through the Financial SystemFunction of Financial MarketsPromotes economic efficiency by producing an efficient allocation of capital, which increases production Directly improve the well-being of consumers by allowing them to time purchases better2.2 Structure of Financial Markets2.2.1 Debt and Equity MarketsDebt instrumentsA bond or a mortgage, which is a contractual agreement by the borrower to pay the holder of the instrument fixed dollar amounts at regular intervals until a specified date (maturity date).Maturity: number of years (term) until that instrument’s expiration date. short-term: less than a year. long-term: ten years of longer intermediate-term: between one and ten yearsEquities Claims to share in the net income and the assets of a business.Equities often make periodic payments (dividends) to their holders and have no maturity date.Owing stock means you own a portion of the firm and thus have the right to vote on issues important to the firm and to elect its directors.The main disadvantage of owning a corporation’s equities rather than its debt is that an equity holder is a residual claimant; that is ,the corporation must pay all its debt holders before it pays its equity holdersThe advantage of holding equities is that equity holders benefit directly from any increases in the corporation’s profitability or asset value.In US, the size of the debt market is often larger than the size of the equities market.2.2.2 Primary and Secondary MarketsA primary market is a financial market in which new issues of a security are sold to initial buyers by the corporation or govern