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Flashcards in 5. Financial Market Deck (27):
1

Financial markets:

marketplace where buyers and sellers participate in asset trades, create products that provide a return for those who have excess funds, making these available to those who require additional money for consumption or investments.

2

Financial intermediaries:

firms that receive the accumulated funds of individuals or firms, and redistribute them through loans to those who will use the funds

3

Primary market:

markets in which firms raise funds by selling financial assets to investors

4

Securities:

any form of financial instrument that provide the holder with a claim over real assets or a future income stream.

5

Secondary market:

markets involving trade of financial assets between investors

6

Consumer Credit

Allows consumers to purchase g/s ahead of payment.

7

Housing Loans-

Offered by financial institutions to purchase property.

8

Business Loans

Loan allowing businesses to invest in operations.

9

Bond Market-

Where bonds are traded-

10

bond

a written document issued by the lender to the borrower stating interest and initial loan. Lenders receive regular interest payments followed by the final payment of the debt at the end of the allocated time.

11

Short term money market-

The trading of financial instruments of high liquidity- temporary shortages/surpluses of funds.

12

Financial Futures

Contracts to trade financial instruments for a certain price in a future transaction.

13


Foreign exchange market

Market for buying and selling foreign currencies.

14

Superannuation

An obligatory account of retirement savings which is often invested into financial products to gain profit.

15

Share Market-

Financial market where investors buy and sell shares (financial assets providing the owner with a part ownership of a company).

16

Australian securities exchange (ASX)

major share market in Australia.

17

All ordinaries index:

share market index measuring changes in the overall value of companies listed on the ASX

18

A public company:

shares can be traded freely on the share market

19

Private company:

restricts ownership of shares to a few individuals

20

Share Market Roles are:

Linking public companies needing equity for expansion and people wanting to invest (aiming for capital gains/dividend income), and to provide a marketplace for share trading.

21

IMF (international monetary fund)

oversees the general stability of the international financial system , monitoring economies and markets, assisting counties that have difficulty meeting international financial obligations.

22

Interest Rate

The cost of borrowing money expressed as a percentage or the reward received for lending money.

23

Monetary policy

use of interest rates to affect the level of economic activity. The RBA does this through DMO (domestic market operations)
o Objectives of monetary policy: 2-3% inflation, full employment, long term economic growth to improve living standards.

24

Lending Rate-

The rate charged by financial institutions for a loan.

25

Borrowing Rate-

The rate offered for the use of one’s money.

26

Real interest rate

nominal interest rate – inflationary expectations

27

DMO- (domestic market operations)

Actions by RBA in the Short Term Money Market to buy and sell securities-