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