Chapter 2 - Financial assets, money, financial transactions, and financial institutions. In this chapter, You will see the most important channels through which funds flow from lenders to borrowers and back again within the global system of money and capital markets, you will discover the nature and characteristics of financial assets how they are created and destroyed by decision makers within the financial system. | Money and Capital Markets 2 C h a p t e r Eighth Edition Financial Institutions and Instruments in a Global Marketplace Peter S. Rose McGraw Hill / Irwin Slides by Yee-Tien (Ted) Fu Financial Assets, Money, Financial Transactions, and Financial Institutions Learning Objectives To learn about the channels through which funds flow between lenders and borrowers within the global financial system. To discover the nature and characteristics of financial assets – how they are created and retired by decision-makers within the financial system. To explore the critical roles played by money and the linkages between money and inflation. Learning Objectives To examine how financial intermediaries and other financial institutions lend and borrow funds and create and retire financial assets within the global system of markets. Introduction The financial system is the mechanism through which loanable funds reach borrowers. Through the operation of the financial markets, money is exchanged . | Money and Capital Markets 2 C h a p t e r Eighth Edition Financial Institutions and Instruments in a Global Marketplace Peter S. Rose McGraw Hill / Irwin Slides by Yee-Tien (Ted) Fu Financial Assets, Money, Financial Transactions, and Financial Institutions Learning Objectives To learn about the channels through which funds flow between lenders and borrowers within the global financial system. To discover the nature and characteristics of financial assets – how they are created and retired by decision-makers within the financial system. To explore the critical roles played by money and the linkages between money and inflation. Learning Objectives To examine how financial intermediaries and other financial institutions lend and borrow funds and create and retire financial assets within the global system of markets. Introduction The financial system is the mechanism through which loanable funds reach borrowers. Through the operation of the financial markets, money is exchanged for financial claims in the form of stocks, bonds, and other securities, effectively transforming savings into investment so that production, employment, and income can grow. The Creation of Financial Assets A financial asset is a claim against the income or wealth of a business firm, household, or unit of government, represented usually by a certificate, receipt, computer record file, or other legal document, and usually created by or related to the lending of money. Characteristics of Financial Assets Financial assets are sought after because they promise future returns to their owners and serve as a store of value (purchasing power). Characteristics of Financial Assets They do not depreciate like physical goods, and their physical condition or form is usually not relevant in determining their market value. Their cost of transportation and storage is low, such that they have little or no value as a commodity. Financial assets are fungible – they can easily be changed in form and .
