Chapter 11 Financial Markets
Financial Markets. Section 1 Investment- the act of redirecting resources from being used today so they can be used to create future benefits When.
Dec 25, 2015
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- Slide 1
- Financial Markets
- Slide 2
- Section 1
- Slide 3
- Investment- the act of redirecting resources from being used today so they can be used to create future benefits When people save or invest, that money is used by business to expand=economic growth
- Slide 4
- Financial assets are documents that show a person made an investment A financial system allows the transfer of money between savers and borrowers
- Slide 5
- Financial Intermediaries are institutions that help channel funds from savers to borrowers Banks, credit unions Finance Companies Mutual Funds Life Insurance Companies Pension Funds
- Slide 6
- Diversification is the spreading out of investments to reduce risk Financial Intermediaries save time/money because they do the research for investments
- Slide 7
- Return is the money an investor receives above and beyond the sum of money initially invested
- Slide 8
- Remember, investing in a friends company could double your money, but the company could fail The higher the potential return of the investment, the great the risk involved
- Slide 9
- Section 2
- Slide 10
- Bonds are loans that the government or a corporation must repay to the investor. Bonds pay a fixed amount of interest for a set amount of time
- Slide 11
- Advantages: Unlike stocks, bonds are not shares of ownership in a company, meaning the price does not go up or down
- Slide 12
- Disadvantages: Whoever issues the bond must make fixed payments, even if times are tough If issuer cannot maintain financial health, difficult to sell bonds
- Slide 13
- Savings- issues by the US government Treasury- US Treasury Department Municipal- state and local governments Corporate- corporation issued (to expand business
- Slide 14
- Section 3
- Slide 15
- Corporations raise money by issuing stock, which represents ownership in the company. A portion of stock is called a share.
- Slide 16
- Stockowners earn a profit in two ways: 1) Dividends- payments made to the stockholder by the company (earned profit) 2) Capital gain- sell stock for more than they paid for it
- Slide 17
- Those who buy common stock are voting members Those who buy preferred are nonvoting members
- Slide 18
- Buying stock is RISKY! If the company experiences economic downturn, that means less dividends (profit) and reduces the value of the stock
- Slide 19
- A stockbroker is a person who links buyers and sellers of stock Stockbrokers work for brokerage firms, or business that specialize in trading stock Stocks are sold on the stock exchange, which are markets for buying and selling stock
- Slide 20
- The New York Stock Exchange (NYSE) is the worlds largest stock exchange.
- Slide 21
- Bull Market- when the stock market rises steadily over a period of time Bear Market- when the stock market falls steadily over a period of time
- Slide 22
- The Dow Jones Industrial Average,The Dow measures how stocks are doing
- Slide 23
- In 1929, the stock market crashed due to speculation, the practice of making high- risk investments with borrowed money in hopes of getting a big return As of the 1980s, only 25% of American households own stock
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