Questions and Answers
financial institutions through which savers can directly provide funds to borrowers
Financial Markets
a debt security that promotes to make payments periodically for a specified period of time
Bond
cost of borrowing
Interest rate
represent a share of ownership in a corporation
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A security that is a claim on the earnings and assets of the corporation
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a global network of international banks and currency traders that trade different countries currencies.
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with international financial institutions connected by means of sophisticated telecommunications system that enable instant, real-time exchange rate quotations.
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the price at which one currency can be converted to another currency
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largest foreign exchange market; serves Europe and Africa; handles over 30% of the world’s daily transactions.
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the group of institutions in the economy that help to match one person's saving with another person's investment.
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Study Notes
Financial Institutions and Borrowing
- Financial institutions serve as intermediaries between savers and borrowers, facilitating the direct provision of funds.
- These institutions include banks, credit unions, and peer-to-peer lending platforms, allowing individuals to invest their savings directly into loans.
Debt Securities
- Debt securities are financial instruments that obligate the issuer to make periodic payments to the holder for a predetermined period.
- Common examples include bonds and notes, which represent borrowed money that must be repaid with interest.
Cost of Borrowing
- The cost of borrowing refers to the total expenses incurred by a borrower when obtaining funds.
- This includes interest rates, fees, and any charges related to the loan, which can significantly impact the overall amount repaid over time.
Equity Ownership
- Equity securities represent a share of ownership in a corporation.
- Investors purchase these shares to gain a stake in the company's profits and influence management decisions.
Claim on Corporate Earnings
- Equity securities grant investors a claim on both the earnings and the assets of the corporation.
- Holders are entitled to dividends and have a right to a portion of the company's assets in the event of liquidation.
Global Currency Trading Network
- An extensive network of international banks and currency traders facilitates global currency trading.
- This network allows for the exchange of different countries’ currencies, essential for international trade and investments.
Telecommunications in Finance
- Modern financial operations are supported by sophisticated telecommunications systems that enable real-time exchange rate quotations.
- This technology allows for instant access to market data, enhancing the efficiency of international financial transactions and trading.
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Description
Explore the various financial institutions that facilitate the direct flow of funds from savers to borrowers. This quiz delves into the roles and functions of these entities in the financial system and their impact on the economy.
