Assignment #5

MONEY, FOREIGN EXCHANGE, FINANCE.

                                                                                          Student’s Name: Giselle Rivas Alcantar

                                                                                          Nua: 415485

After watching the video, answer the following questions in complete sentences.

1. What is Finance?

Are monetary resources comprising debt and ownership funds of the State, company or person.

2. What is Financial System?

The financial system is the one that deals with the financial transactions and the exchange of money between savers, investors, lenders, and borrowers.

3. What are the functions of a financial system?

- Provides a payment system for the exchange of goods and services in the economy.

- Provides a mechanism to pull the funds in terms of household saving for corporate investments.

- Provides a financial capital for long-term capital formation for the government and business organizations.

- Facilitates the investors and other market participants to liquidate their investment alternatives like stocks and bonds.

- Provides the avenues for managing the risks faced by the market participants.

- Takes care of both short- and long-term needs of the market participants.

- Supplies the required financial capital to government for public expenditure on the social welfare activity, infrastructure development etc.

-Provides the financial services which means that it tries to provide a certain kind of service to the different stakeholders to maximize their return o to fulfill their requirements in terms of financial requirements.

-Integrate stakeholders for the transaction purpose and to exchange money between them. Make a relationship between the different stakeholders.

4. How are the main types of financial institutions categorized? Describe each one.

Regulatory: their works is to oversee the functioning and fairness of financial markets and the firms that engage in financial activity.

Intermediaries: Are those who provide a middle ground between two parties in any financial transaction. They lend money as well as mobilize savings.

Non – intermediaries: Are those institutions that do the loan business, but their resources are not directly obtained from the savers. They don’t directly interact with the savers or the investors.

Others: Are specialized institutions that are required to solver specific problems.

5. Which are the main classes of financial instruments issued in a financial system? Describe them in detail.

Cash Instruments: Are financial instruments with values directly influenced by the condition of the markets. Within cash instruments, there are two types: securities and deposits, and loans.

Derivative instruments: Are financial instruments that have values determined from underlying assets is an investment term that refers to the real financial asset or security that a financial derivative is based on. Thus, the, such as resources, currency, bonds, stocks, and stock indexes.

Foreign exchange instruments: Are financial instruments that are represented on the foreign market and primarily consist of currency agreements and derivatives.

6. What are the distinctions between various types of financial markets according to their function? Explain them.

Money and Capital Markets:

This conventional distinction is based on the differences in the periods of maturity of financial assets issued in these markets.

While the money markets deal in the short-.term claims (with a period of maturity of one year or less), the capital markets does so in the long-term (maturity periods above 1 year) claim.

Primary and Secondary Markets:

Primary markets deal in the new financial claims or new securities.

Secondary markets deal in securities already issued or existing or outstanding.

7. What does the “flow of funds” refer to? Explain in detail.

They are financial accounts used to monitor the flow of various sectors of the national economy. The data obtained from the flow of funds is analyzed by a central bank and published so that they are available to all citizens of a nation.

Write a final reflection on the topic, mentioning what were the most important aspects you learned.

It is important that everyone knows at least the most basic of the operation of the financial system, this way they can make the best decisions knowing what to expect when obtaining a loan, for example. Knowing what you are dealing with prevents mistakes that cause losses. The financial system affects us all but it also helps us. Knowing what kind of institutions to go to depending on what you need is beneficial because it will facilitate the whole process.