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Financial markets transfer resources across time and space

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  1. Introduction
  2. Financial markets
  3. Main Functions Provided By Financial Markets
  4. Classification of financial marke
  5. Main Differences between Investment Banking and Commercial Banking Business
  6. Conclusion

Financial markets comprise a collection of formal and informal institutions whose functions stretches to facilitate movement of financial resources. Firstly, financial institutions provide mechanisms for where economic agents clear and settle their obligations. This arises when the financial system facilitates the transfer of ownership of economic resources. Secondly, it enables the pooling of financial resources where investors accumulate their contributions into a single investment fund. This enables investors to fund projects in which they cannot afford as an individual (Bailey, 2008, p. 2). Besides, conducting transfer of economic resources across time and space, financial markets provide mechanisms in which economic units manage their risk. For example, the financial system offers a variety of instruments including hedging, diversification and insurance from which economic agents' pool, price and exchange risks (Chandra, 2011, p. 25). Finally, financial intermediaries provide information useful in making decisions and allocation of resources (Liebscher, 2008, p. 160) Classification of the financial markets is attained under various perspectives including financial instruments, feature of the services, trading procedures, key market participants, as well as the origin of the markets (Darskuviene, 2010). Firstly, according to the origin the market is classified into national markets and external market. The national market comprises a domestic section where issuers of financial instruments only trade them in that country while a foreign market allow trading of securities in other countries.

[...] For years 7-10 you will again receive cash profits per year of $5,000,000. At the end of year ten, the shopping mall will be destroyed in a nuclear war. Therefore, there are no more cash flows to consider after year ten. You require a return of 30% on this project. Calculate the Discounted Payback of this project. This table shows the revenue of the project over the years. Years Shopping Mall millions) 0 R1 Discounted Payback = i = required rate of return i + R2 i + R3 i + . [...]

[...] Annual coupon payment = $70 The coupon rate correspond to $ 70 / $ = 0.07 = Five years later the market interest have changed. bond. New market interest rates = Calculate the premium or discount on this To calculate the premium or discount on the bond, I will use the Present Value of a Bond = Interest * (PVIFA + Maturity * (PVIF = 70 * (PVIFA + * (PVIF = 70 * 4.4518 + * 0.8219 = The premium on this bond is $ 133.526 Recalculate your answer to above if these bonds paid interest semi-annually. [...]

[...] Future value = prevent value Present value = future value / i = interest? n = number of period Perpetuity:? present value = payment / - i = interest rate g = growth rate Annuity:? present value of annuity = payment x (PVIF future value of annuity = payment x (FVIFA * voir la feuille avec plein de nombres partout present value of bond = interest x (PVIFA + N x (PVIF N = maturity value * voir la feuille avec plein de nombres partout yield to maturity = current yield + capital gain or loss current yield = interest / price Constant growth present value of cash flow = D1 / - D1= dividend 1 (première année) i = risk (interest) g = growth A. formule present value of annuity B. tableau de repayment of a loan C. [...]

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