Chapter 2 The Financial Market and Interest Rates Chapter Objectives

Financial Markets

• Real assets are tangible assets such as houses, equipment, and inventories.
• Financial assets represent claims for future payments in other economic units.

Underwriting — the purchase of financial claims of borrowing units and reselling them at a higher price to other investors.

• Underwriting — the purchase of financial claims of borrowing units and reselling them at a higher price to other investors.
• Secondary Markets — trading in already existing financial claims
• Financial Intermediaries — major financial institutions, i.e. commercial banks, savings and loans, credit unions, life insurance companies, mutual funds etc.

Financial Markets

Indirect Securities – financial claims offered by financial intermediaries to economic units with excess savings

• Indirect Securities – financial claims offered by financial intermediaries to economic units with excess savings