Chapter 2 The Financial Market and Interest Rates Chapter Objectives

Foundations of Finance Arthur J. Keown John D. Martin J. William Petty David F. Scott, Jr.

Chapter 2

The Financial Market

and

Interest Rates

Chapter Objectives

• Understanding the historical relationship between internally generated and externally generated sources of funds.
• Understand the financing mix that tends to be used by the firms raising long-term capital.
• Explain why the financial markets exist in a developed country.
• Explain the financing process by which savings are supplied and raised by major sectors in the economy.

Chapter Objectives

• Describe key components of the U.S. financial market system.
• Understand the role of the investment-banking business in the context of raising corporate capital.
• Distinguish between privately placed securities and publicly offered securities.
• Be acquainted with securities floatation costs and securities markets regulations.