Money and banking

Blackboard Homework Instructions

  • Access the homework module on Blackboard to find Homework One.

  • Download the document containing the homework instructions.

  • Pay close attention to the homework submission instructions to understand how and where to submit.

Submission Details

  • Main Submission Platform: Majority of assignments submitted via Blackboard.

    • Unlimited resubmissions allowed until the submission deadline.

  • Econ Load Up Submission: One specific question to be completed on the Econ Load Up platform.

    • This submission is also due by the homework deadline.

Files to Submit on Blackboard

  1. Answer Sheet: Contains responses to lecture-based short answer questions.

    • Homework One includes two short answer questions.

    • Complete both questions and upload them as a single document (one page recommended).

    • Submissions can be handwritten, photographed, or scanned.

  2. Excel File: Contains answers to the data analysis question.

    • All homeworks will have the same structure: short answer questions, econ loadup question, and data analysis section.

Homework Structure

  • Each homework comprises:

    1. Traditional Short Answer Questions (2 questions in Homework One)

    2. Econ Load Up Question (Question Two)

    3. Data Analysis Section (submitted as an Excel file)

Importance of Data Analysis

  • Focusing on data analysis will help understand class material better and practice using Excel for future projects.

  • This approach prepares students for their presentations later in the term.

Communication and Due Dates

  • Periodic announcements via Blackboard will remind students of due dates.

  • Questions about submissions can be addressed by contacting the instructor.

Team Project Information

  • Group details for the FAB project can be found under the Blackboard groups tab.

  • Each student will find their respective group members and contact information.

Financial System Lecture Information

  • Lectures Two and Three will introduce fundamental concepts about the financial system:

    • Lecture Two: Focuses on interest rates and their significance in economic frameworks.

    • Lecture Three: Delves deeper into financial systems and connections between savers and borrowers.

Overview of Funds Flow

  • Funds flow between savers (people with excess savings) and borrowers (those needing funds for investment).

  • Funds can flow through:

    1. Direct Finance: Savers purchase financial instruments like stocks/bonds directly from borrowers in financial markets.

    2. Indirect Finance: Utilizing financial intermediaries (like banks) that stand between savers and borrowers.

Differentiating Financial Markets

  • Direct Finance: Transactions occur directly in financial markets.

  • Indirect Finance: Involves intermediaries facilitating loans and investments.

Financial Instruments

  • Examples:

    • Mortgages: Key long-term financial instruments.

    • Stocks and Bonds: Types of debt instruments in the market.

Market Definitions

  • Primary Market: Where new securities are issued.

  • Secondary Market: Where previously issued securities are traded.

  • Examples of secondary markets include NYSE and NASDAQ.

International Financial Markets

  • Important exchanges exist globally, impacting trading volumes and market behaviors.

  • Focus on the Forex Market as a significant international venue for trading.

Financial Intermediaries

  • Types include:

    • Commercial Banks

    • Credit Unions

    • Insurance Companies

    • Pension Funds

    • Mutual Funds

  • Purpose: Provide services that reduce transaction costs, manage risks, and address asymmetric information issues between savers and borrowers.

Understanding Asymmetric Information

  • Asymmetric Information: Borrowers have more knowledge about their projects than lenders.

  • Adverse Selection: Risk of lending to potentially bad borrowers due to lack of information before the transaction.

  • Moral Hazard: Risk that borrowers may not act as expected after receiving funds.

Transaction Costs and Risk Management

  • Financial intermediaries reduce transaction costs through economies of scale.

  • Investors face lower risk exposure via asset transformation and diversification, making intermediaries appealing.

Conclusion & Review

  • Understanding these concepts in finance is critical for navigating upcoming lectures on interest rates and monetary policies.