ChapterChapter
Financial InstitutionsFinancial Institutions
9
Chapter ObjectivesStudents will learn: Basic functions of financial service
institutions Basic functions of financial
intermediaries Basic properties of stocks and bonds
Financial Service Institutions
Inte
rest
S
A
V
E
R
S
Interest
Interest
Interest
B
O
R
R
O
W
E
R
S
Can you think of any other
types of borrowers?
Business Growth
Profits vs. Lending
Savings is investing
Capital investments = economic growth
Banking Products
• Keeping Money Safe (insurance, FDIC)
• Transferring Funds (portability, access)
• Loaning Money (interest, investing)
stocks and bonds
Primary Market
Secondary Market
Securities Market
OTC Market
BONDS
STOCKS
States of the Market
Bull Market Bear Market
RISK• Bear market = bigger risk
• Mutual funds reduce risk– Shares in a company that invests in stocks
and bonds of other companies– Diversification reduces risk– Expert analysis and advice– Dividends