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Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by.

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Presentation on theme: "Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by."— Presentation transcript:

1 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 1 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson PowerPoint Slides to accompany Financial Institutions, Instruments and Markets Fourth Edition by Christopher Viney Designed and Written by Anthony Stanger School of Commerce The Flinders University of South Australia Copyright 2003 McGraw-Hill Australia Pty Ltd

2 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 2 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Chapter 1 The Financial System Websites:

3 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 3 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Learning Objectives Explain the functions of a financial system Describe the main classes of financial instruments issued in a financial system Distinguish between various types of financial markets according to function Discuss the flow of funds between savers and borrowers, including direct and intermediated finance

4 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 4 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Learning Objectives (cont.) Appreciate the influence of globalisation on financial markets Categorise the main types of financial institutions Understand the impact of a financial crisis on a financial system and a real economy

5 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 5 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Chapter Organisation 1.1Introduction 1.2Functions of the Financial System 1.3Financial Instruments 1.4Financial Markets 1.5Impact of Globalisation 1.6Financial Institutions 1.7Summary

6 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 6 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.1Introduction Money – Medium of exchange – Allows specialisation in production – Solves the divisibility problem, i.e. where medium of exchange does not represent equal value for the parties to the transaction – Facilitates saving – Store of wealth

7 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 7 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.1 Introduction (cont.) Role of markets – Facilitate exchange by Bringing opposite parties together Establishing rates of exchange, i.e. prices Surplus units – Savers of funds available for lending Deficit units – Borrowers of funds for capital investment and consumption

8 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 8 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.1 Introduction (cont.) Financial instrument – Issued by a party raising funds, acknowledging a financial commitment and entitling holder to specified future cash flows Flow of funds – Movement of funds through the financial system between savers and borrowers giving rise to financial instruments

9 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 9 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.1 Introduction (cont.) Financial system – Financial institutions, instruments and markets facilitating transactions for goods and services and financial transactions – Overcomes difficulty of Double coincidence of wants Transaction between two parties meets their mutual needs

10 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 10 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.1 Introduction (cont.)

11 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 11 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Chapter Organisation 1.1Introduction 1.2Functions of the Financial System 1.3Financial Instruments 1.4Financial Markets 1.5Impact of Globalisation 1.6Financial Institutions 1.7Summary

12 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 12 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.2 Functions of the Financial System Attributes of financial assets – Return or yield Total financial compensation received from an investment expressed as a percentage of the amount invested – Risk Probability that actual return on an investment will vary from the expected return

13 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 13 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.2 Functions of the Financial System (cont.) Liquidity – Ability to sell an asset within reasonable time at current market prices and for reasonable transaction costs Time-pattern of the cash flows – When the expected cash flows from a financial asset are to be received by the investor or lender

14 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 14 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.2 Functions of the Financial System (cont.) The financial system facilitates portfolio restructuring – The combination of assets and liabilities comprising the desired attributes of return, risk, liquidity and timing of cash flows

15 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 15 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.2 Functions of the Financial System (cont.) An efficient financial system – Encourages savings – Savings flow to the most efficient users – Implements the monetary policy of governments by influencing interest rates – The combination of assets and liabilities comprising the desired attributes of return, risk, liquidity and timing of cash flows

16 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 16 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Chapter Organisation 1.1Introduction 1.2Functions of the Financial System 1.3Financial Instruments 1.4Financial Markets 1.5Impact of Globalisation 1.6Financial Institutions 1.7Summary

17 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 17 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.3 Financial Instruments Equity – Ownership interest in an asset – Residual claim on earnings and assets Dividend Liquidation – Types Ordinary share Hybrid (or quasi-equity) security Preference shares Convertible notes

18 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 18 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.3 Financial Instruments (cont.) Debt – Contractual claim to Periodic interest payments Repayment of principal – Ranks ahead of equity – Can be secured or unsecured

19 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 19 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.3 Financial Instruments (cont.) Derivatives – A synthetic security providing specific future rights that derives its price from a Physical market commodity Gold and oil Financial security Interest rate-sensitive debt instruments, currencies and equities – Used mainly to manage price risk exposure, and to speculate

20 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 20 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.3 Financial Instruments (cont.) Four basic derivative contracts – Futures (Chapter 18) – Forward (Chapter 18) – Option contract (Chapter 19) – Swap (Chapter 20)

21 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 21 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Chapter Organisation 1.1Introduction 1.2Functions of the Financial System 1.3Financial Instruments 1.4Financial Markets 1.5Impact of Globalisation 1.6Financial Institutions 1.7Summary

22 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 22 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.4 Financial Markets Matching principle Primary and secondary market transactions Direct and intermediated financial flow markets Wholesale and retail markets Money markets Capital markets

23 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 23 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Matching principle Short-term assets should be funded with short-term liabilities – Inventory funded by overdraft Longer-term assets should be funded with equity or longer-term liabilities – Equipment funded by debentures

24 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 24 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Primary and secondary market transactions Primary market transaction – The issue of a new financial instrument to raise funds to purchase goods, services or assets by Businesses Company shares or debentures Governments Treasury notes or bonds Individuals Mortgage

25 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 25 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Primary and secondary market transactions (cont.) Secondary market transaction – The buying and selling of existing financial instruments No direct impact on original issuer of security Transfer of ownership from one saver to another saver Provides liquidity which facilitates restructuring of portfolios of security owners

26 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 26 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Direct and intermediated financial flow markets Direct flow markets – Users of funds obtain finance directly from savers Advantages Avoids costs of intermediation Increases range of securities and markets Disadvantages Matching of preferences Liquidity and marketability of a security Search and transaction costs Assessment of risk, especially default risk

27 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 27 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Direct and intermediated financial flow markets (cont.)

28 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 28 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Direct and intermediated financial flow markets (cont.) Intermediated flow markets – A financing arrangement involving two separate contractual agreements whereby saver provides funds to intermediary, and the intermediary provides funding to the ultimate user of funds – Advantages Asset transformation Maturity transformation

29 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 29 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Direct and intermediated financial flow markets (cont.) – Advantages (cont.) Credit risk diversification and transformation Liquidity transformation Economies of scale Sectorial flow of funds – The flow of funds between business, financial institutions, government and household sectors and the rest of the world – Influenced by fiscal and monetary policy

30 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 30 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Direct and intermediated financial flow markets (cont.)

31 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 31 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Wholesale and retail markets Wholesale markets – Direct financial flow transactions between institutional investors and borrowers Involves large transactions Retail markets – Transactions conducted primarily with financial intermediaries by the household and small- medium business sectors Involves smaller transactions

32 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 32 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Money markets Wholesale markets in which short-term securities are issued and traded – Securities highly liquid Term to maturity of one year or less Highly standardised form Deep secondary market – No specific infrastructure or trading place – Enable participants to manage liquidity

33 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 33 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Money markets (cont.) Money market securities – Cash deposits (11 a.m. and 24-hour call) – Commercial bills – Treasury notes – Government bonds – Promissory notes – Intercompany loans – Interbank loans

34 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 34 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Money markets (cont.) Money market participants – Reserve Bank Financial system liquidity Implementation of monetary policy – Banks – Finance companies – Funds managers – Building societies – Credit unions – Companies

35 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 35 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Money markets (cont.) Money market sub-markets – Intercompany market – Interbank market – Bills market – Commercial paper market – Negotiable certificates of deposit (CDs) market

36 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 36 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Capital markets Markets in which longer-term securities are issued and traded – Equity markets – Corporate debt markets – Government debt markets – Foreign exchange markets – Derivatives markets Term to maturity of more than one year

37 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 37 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Chapter Organisation 1.1Introduction 1.2Functions of the Financial System 1.3Financial Instruments 1.4Financial Markets 1.5Impact of Globalisation 1.6Financial Institutions 1.7Summary

38 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 38 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.5 Impact of Globalisation Globalisation of financial markets – Refers to the interdependence of national financial systems – Global standardisation of financial instruments – Facilitates the movement of funds between savers and borrowers in different countries

39 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 39 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Chapter Organisation 1.1Introduction 1.2Functions of the Financial System 1.3Financial Instruments 1.4Financial Markets 1.5Impact of Globalisation 1.6Financial Institutions 1.7Summary

40 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 40 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.6 Financial Institutions Financial institutions permit the flow of funds between borrowers and lenders by facilitating financial transactions Institutions may be categorised by differences in the sources and uses of funds

41 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 41 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.6 Financial Institutions (cont.) Categories of financial institutions – Depository financial institutions – Investment banks and merchant banks (money market corporations) – Contractual savings institutions – Finance companies – Unit trusts

42 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 42 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Categories of financial institutions Depository financial institutions Attract savings from depositors and investors to provide loan facilities to borrowers – Commercial banks – Building societies – Credit unions

43 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 43 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Categories of financial institutions (cont.) Investment banks and merchant banks (money market corporations) Mainly provide off-balance-sheet (OBS) transactions to corporations and government – Advice on mergers and acquisitions, portfolio restructuring, finance and risk management Provide some funding

44 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 44 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Categories of financial institutions (cont.) Contractual savings institutions The liabilities of these institutions are contracts that specify, in return for periodic payments to the institution, the institution will make payments to the contract holders if a specified event occurs Funds are then used to purchase both primary and secondary market securities – Life and general insurance companies – Superannuation funds

45 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 45 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Categories of financial institutions (cont.) Finance companies Funds are raised by issuing financial securities direct into money markets and capital markets Funds are used to make loans to ultimate borrowers

46 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 46 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Categories of financial institutions (cont) Unit trusts Investors purchase units in the trust Trust manager invests funds in a range of investments specified by trust deed Types of unit trusts – Cash management trusts – Equity trusts – Property trusts – Mortgage trusts

47 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 47 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.6 Financial Institutions (cont.) Assets of financial institutions

48 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 48 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson Chapter Organisation 1.1Introduction 1.2Functions of the Financial System 1.3Financial Instruments 1.4Financial Markets 1.5Impact of Globalisation 1.6Financial Institutions 1.7Summary

49 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 49 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.7 Summary The financial system is composed of financial institutions, instruments and markets facilitating transactions for goods and services and financial transactions Financial instruments may be equity, debt or hybrid

50 Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments and Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger 50 Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by Willis Slides prepared by Kaye Watson 1.7 Summary (cont.) Financial markets may be classified according to – Primary and secondary transactions – Direct and intermediated flows – Wholesale and retail markets – Money markets and capital markets – Financial institutions


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