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25 Cards in this Set

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financial intermediation
the process of transfering funds from surplus economic units to deficit economic units
how do firms obtain funds?
by issuing financial (paper) assets: money-market instruments, capital-market instruments, and money
money-market instruments
those whose maturities are less than one year
capital-market instruments
those whose maturities are longer than one year
money
used as a medium of exchange, store of value, and a standard of value
coins, currency, demand deposits, and NOW accounts
M-1
demand deposits at commercial banks, currency in circulation, balances in NOW accounts, + other transaction accounts at financial institutions
M-2
M-1 + savings and small-denomination time-deposit accounts, + money market mutual fund shares
M-3
M2 + large-denomination time deposits
L
M-3 + other liquid assets such as commercial paper, T Bills, etc
depository financial institutions
commercial banks, savings & loan associations, & credit unions
money markets
group of markets where short-term instruments are traded
short term instruments
T bills, commercial paper, bankers' acceptances, negotiable cds, repurchase agreements, & federal funds
T bills
direct obligations of the US gov't
commercial paper
short-term unsecured promissory notes sold directly or through dealers by finance companies & certain industrial concerns
bankers' acceptances
short-term credit instruments that aries out of foreign transactions
negotiable cds
formal negotiable receipts for funds left with the bank for a specified period of time, usually 30 days to a year
repurchase agreements
arrangements whereby a securities dealer sells its short-term securities with a simultaneous agreement to buy them back later
federal funds
loans btw banks on an overnight basis
capital markets
deal in long-term securities such as stocks, bonds, and mortgages
primary market
where the firm sells its new securities
secondary market
market where securities have already been issued and sold
bond
a written promise to make payments of interest and principal on a specified future date to the holder of the bond
types of bonds
US treasury issues, US agency issues, municipal issues, corporate bonds
stocks
common stocks & preferred stocks
forms of business organization
sole proprietorship, partnership, corporation