Financial Intermidiaries
FINTMED CLASSROOM NOTES
FINANCIAL INTERMEDIARY * a middleman between people who needs capital and people who has capital * Institutions that matches lenders and borrowers
TOPICS: (for the whole term) OVERVIEW | INTEREST RATES | BANKS | COLLATERAL AND CREDIT RISK MANAGEMENT | NON-DEPOSITORY FINANCIAL INSTITUTION | BANK CAPITAL AND DEPOSIT INSURANCE | * Insurance firms | BANK RUNS AND CONTAGIONS | * Securities firms | BOND MARKETS | * Investment firms | EQUITY MARKETS | * Mutual funds | FOREIGN EXCHANGE MARKETS | * Finance companies | DERIVATIVES | * Private equity | * Venture companies | * Hedge funds | * Angels |
FRACTIONAL RESERVE BANKING * A form of banking where banks maintain reserves (of cash and coin deposits at the central bank) that are only a fraction of the customer’s deposits. * Deposited funds are mostly lent out, and a bank keeps only a fraction (called reserve ratio) of the quantity of deposits as reserves. Some of the funds lent out are subsequently deposited with another bank, increasing deposits at that second bank and allowing further lending, and so on…
Cash: 1125 | 1125 GP | Loan: 1125 375 | 1500 GP Demand Deposits | Loan: 1500 375 | 2000 GP | | 1000 GP | 3400 | 3400 |
MONEY * A promise to pay * A claim to goods and services
BANK NOTES * Another name for “cash” * A negotiable promissory note issued by a bank and payable to the bearer on demand REVENUE | 150 | * Apple grower | 100 | Subtotal | 50 | Operating Expenses | | * Salaries | 10 | * Search Cost | 5 | * Miscellaneous | 1 | SUBTOTAL | 34 | * Tax (30%) | 23.8 | NET INCOME | 10.2 |
* Faith is important in a banking system.
FINANCIAL INTERMEDIARIES * Broker – brings the buyers and sellers together * Asset Transformer – carries financial risk on their
FINANCIAL INTERMEDIARY * a middleman between people who needs capital and people who has capital * Institutions that matches lenders and borrowers
TOPICS: (for the whole term) OVERVIEW | INTEREST RATES | BANKS | COLLATERAL AND CREDIT RISK MANAGEMENT | NON-DEPOSITORY FINANCIAL INSTITUTION | BANK CAPITAL AND DEPOSIT INSURANCE | * Insurance firms | BANK RUNS AND CONTAGIONS | * Securities firms | BOND MARKETS | * Investment firms | EQUITY MARKETS | * Mutual funds | FOREIGN EXCHANGE MARKETS | * Finance companies | DERIVATIVES | * Private equity | * Venture companies | * Hedge funds | * Angels |
FRACTIONAL RESERVE BANKING * A form of banking where banks maintain reserves (of cash and coin deposits at the central bank) that are only a fraction of the customer’s deposits. * Deposited funds are mostly lent out, and a bank keeps only a fraction (called reserve ratio) of the quantity of deposits as reserves. Some of the funds lent out are subsequently deposited with another bank, increasing deposits at that second bank and allowing further lending, and so on…
Cash: 1125 | 1125 GP | Loan: 1125 375 | 1500 GP Demand Deposits | Loan: 1500 375 | 2000 GP | | 1000 GP | 3400 | 3400 |
MONEY * A promise to pay * A claim to goods and services
BANK NOTES * Another name for “cash” * A negotiable promissory note issued by a bank and payable to the bearer on demand REVENUE | 150 | * Apple grower | 100 | Subtotal | 50 | Operating Expenses | | * Salaries | 10 | * Search Cost | 5 | * Miscellaneous | 1 | SUBTOTAL | 34 | * Tax (30%) | 23.8 | NET INCOME | 10.2 |
* Faith is important in a banking system.
FINANCIAL INTERMEDIARIES * Broker – brings the buyers and sellers together * Asset Transformer – carries financial risk on their