Introduction to Finance

capital markets 
where debt 
securities with maturities longer 
than one year and corporate stocks 
are issued or traded
primary market 
where the initial 
off ering or origination of debt and 
equity securities takes place 
secondary markets 
where the 
transfer of existing debt (bonds and 
mortgages) and equity securities 
between investors occurs
debt securities 
obligations to 
repay borrowed funds
debt securities markets 
where 
money market securities, bonds, 
and mortgages are originated and 
traded
bond markets 
where debt 
securities with longer-term 
maturities are originated and traded
mortgage markets 
where loans to 
purchase real estate are originated 
and traded
equity securities 
ownership 
shares, called common stocks, in 
corporations
equity securities markets 
where 
corporate ownership shares are 
initially sold and traded
derivative securities markets 
where fi nancial contracts that derive 
their values from underlying debt 
and equity securities are originated 
and traded

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16
C H A PT E R 1 The Financial Environment
contracts are handled in electronic markets often involving commercial banks or other fi nancial 
institutions. We discuss derivative securities in the Learning Extension to Chapter 11.
Foreign exchange markets
(also called FOREX markets) are electronic markets in 
which banks and institutional traders buy and sell various currencies on behalf of businesses 
and other clients. In the global economy, consumers may want to purchase goods produced or 
services provided in other countries. Likewise, an investor residing in one country may wish 
to hold securities issued in another country. For example, a U.S. consumer may wish to pur-
chase a product in a foreign country. If the product is priced in the foreign country’s currency, 
it may be necessary to exchange U.S. dollars for the foreign currency in order to complete the 
transaction. Businesses that sell their products in foreign countries usually receive payment in 
the foreign currencies. However, because the relative values of currencies may change, fi rms 
often use the currency exchange markets to reduce the risk of holding too much of certain 
currencies. We discuss currency exchange rates and foreign exchange markets in Chapter 6.
1.6
Careers in Finance
Career opportunities in fi nance are available in business fi nancial management, depository 
fi nancial institutions, contractual savings and real property organizations, and securities mar-
kets and investment fi rms. While you may aspire to own your own business or to be a chief 
executive offi
cer (CEO) or chief fi nancial offi
cer (CFO) in a major corporation, most of us 
must begin our careers in an entry-level position. Following are some of the ways to get started 
in a fi nance career.