are places where individual investors and corporations can treat currencies invest in companies and arrange loans

Without the__________ global financial markets, governments would not be able to borrow money, companies would not have access to capital they need to expand, and investors and individuals would be unable to buy and sell foreign currencies

Those who have savings and lending funds

Those who must borrow funds to finance their spending

Firms often require funds to build new facilities, replace machinery or expand their business in other ways.

Share, bonds and other types of financial instruments make this possible

The ________ is also an important source of capital for individuals who wish to buy homes or cars or even to make credit card purchases.

As well as long term capital the _________ provide the grease that makes many commercial transactions possible

This includes such things as arranging payment for the sale of a product abroad and providing working capital so that a firm can pay employees if payment from customers run late.

The value of an owns of gold or a share of stock is no more and no less than what someone is willing to pay for to own it.

This is important not only to those buying and selling businesses but also to regulators

An insurer for example may appear strong if it values the securities it owns at the prices it paid for them years ago but the relevant question for judging its solvency is white prices those securities could be solved for if it needed cash to pay claims today.

In countries with poorly developed financial markets commodities and currencies may trade at busley different prices in different location

. As traders in financial markets attempt to profit from this divergences, prices move towards a uniform level making the entire economy more efficient

Also means buying law and selling high

The stock bond and money markets provide an opportunity to earn a return on funds that are not needed immediately and to accumulate assets that will provide an income in the future

Features, options and other derivatives contracts can provide protection against many type of risk such as the possibility that a foreign currency will lose value against the domestic currency before an expert payment is received

They also enable the markets to attach a price to risk allowing firms and individuals to trade risk so they can reduce their exposure to some while retaining exposure to others. Commercial Transactions

Where new funds are raised

This is where the funds transfer from savers to users.

They are the ones who buy the stocks and bonds

Is where the financial instruments are traded from one investor to another.

The only way to take profit from the stocks purchase from the primary market is to sell it to another investor willing to pay for it this is where secondary market come into play hands they serve two functions

The secondary market determines the price of the security that the issuing firm sells in the firm market. The firms that buy securities in the primary market will pay the issuing corporation no more than the price that they think the secondary market will set for the security

In other words it is also an agreement by the borrower to pay the holder of the instrument fixed amounts at regular intervals (interest and principal payments) until a specified date or the maturity date

When a business needs cash for a couple of months until a big payment arrives, or When the bank wants to invest money that depositors may withdraw at any moment, or when a government tries to meet its payroll in the face of big seasonal fluctuations in tax receipts, the short term liquidity transactions occur in the money market.

If you own one share of common stock in a company that has issued 1 million shares you are entitled to 1 one millionth of the firm's net income and 1 one millionth of the firm's assets

_________ with a maturity between one and ten years are said to be intermediate term.

The second method of raising pants is by issuing __________, such as common or ordinary stock which are residual claims on assets

The term _________ refers to the network of corporations, financial institutions, Investors and governments which deal with the flow of short term capital

The __________ have expanded significantly in recent years as a result of the general outflow of money in the banking industry, a process referred to as disintermediation

In addition to the definition above, these are markets that trade debt securities or instruments with maturities of one year or less (short-term instruments).

________is the amount of money related to one particular instrument. Money market instruments generally have ________.

The money market instruments are usually considered to be of _______ only in terms of the default risk.

This is a risk that the obligation will not be paid on time and in full

The money market exists to provide the loans that financial institutions and governments need to carry out their day-to-day operations.

Banks may sometimes need to borrow in the short term two fulfill their obligations to their customers, and they use the money market to do so.

Banks may also find that they have greater demand for mortgages or loans than they do for savings accounts at certain times

Companies with low credit ratings can issue commercial papers. This is because commercial papers are not actively traded and because it is also unsecured debt

The money markets are the mechanisms that bring these borrowers and investors together without the comparatively costly intermediation of banks. They make it possible for borrowers to meet short-run liquidity need and deal with irregular cash flows without resorting to more costly means of raising money

There is an identifiable money market for each currency, because interest rates vary from one currency to another. These markets are not independent, and both investors and borrowers will shift from one currency to another not depending upon relative interest rates

Most money market transactions occur not in the investor’s home currency

An unsecured short-term promissory note issued by a corporation to raise short-term cash, often to finance working capital requirements

It is generally held by investors from the time of issue until maturity. Thus, there is no active secondary market for ________.

is an evaluation of the risk of default for a particular borrower.

Can also be backed by a line of credit (promise by a commercial bank to make a particular loan to a borrower)

It is a promise to pay or a promissory note by a corporation and the bank guarantees that it will pay

Issued by corporations, usually used in international trade. These are used to Finance trade in goods that have yet to be shipped from a foreign exporter (seller) to a domestic importer (buyer).

is a time draft payable to a seller of goods, with payment guaranteed by a bank. Time drafts issued by a bank are orders for the bank to pay a specified amount of money to the better of the time draft on a given date.

Often prefer that banks act as guarantors for payment before sending goods to domestic importers.

Means to assumer responsibility in case of default

both the corporation and bank promise to pay

are securities with a maturity of one year or less, issued by national governments.

Generally considered the safest of all possible investments because it is default-free

Can occur when a borrower is unable to make timely payments, misses payments, or avoids or stops making payments.

are heavy borrowers in the money markets in many countries. These include entities suchas development banks, housing finance corporations, education lending agencies and agricultural finance agencies.

issued by provincial or local governments, and by agencies of these governments such as schools, authorities and transport commissions

The ability of governments at this level to issue money market securities varies greatly from country to country.

These are loans extended from one bank to another with which it has no affiliation. Many of these loans are across international boundaries and are used by the borrowing institution to re-lend to its own customers

is a bank-issued time deposit that specifies an interest rate and maturity date and is negotiable (salable) in the secondary market

are short term unsecured loans from one bank to another. They may be used to help the borrowing bank finance loans to customers, but often the borrowing bank adds the money to its reserves in order to meet regulatory requirements and to balance assets and liabilities.

is a bearer instrument- whoever holds The CD when it matures receives the principal and interest.

s an agreement involving the sale of securities by one party to another with a promise to repurchase the securities at a specified price and on a specified date in the future

is the sale of the security and buying back

is a financial market in which longer-term debt (original maturity of one year or greater) and equity instruments are traded.

are often held by financial intermediaries such as insurance companies and pension funds, which have little uncertainty about the amount of funds they will have available in the future

Capital market securities include bonds, stocks and mortgages

The national government issues long-term notes and bonds to fund the national debt while local governments issued notes and bonds to finance capital projects