Task 1
Name: Luis Gerardo Calderón Alatorre
Answer the
questions.
What is Finance?
As a definition “finance”
is a term that describe every activity associated with banking, debt, credit
capital markets, money and investments. As you can see, this term refers to de
money management and the acquiring of it.
What is Financial System?
Every financial institution
is attached to a financial system. It is a network that allows these
institutions to exchange funds, and these operate at a national or a global
level.
What are the functions of a
financial system?
Every financial
transaction made by a financial institution is made through a financial system.
These transactions comprehend the following:
-Capital Formation
-Facilitates payment
-Provides liquidity
-Short- and long-term needs
-Risk function
-Finances government needs
-Economic development
How are the main types of
financial institutions categorized? Describe each one.
-Banking: provides every
kind of transaction for its customers like transfers, pays, exchanges. Lends,
investments and savings accounts.
-Non-banking: these are not
licensed as a bank but still they have the capability of providing some of the
financial services for its customers.
-Intermediaries: these
comprehend the link between savers and investors, these institutions are needed
by all banking institutions.
-Non intermediaries: these
institutions are not attached to a financial institution. Their activities
comprehend: currency exchanges, microloans, and pawn shops.
Which are the main classes
of financial instruments issued in a financial system? Describe them in detail.
There are two financial
instruments that are issued in a financial system:
-Cash: These instruments
are determined by the international or national markets. Cash is easily transferable;
this means that it can be moved with ease through the population.
-Derivates: these comprehend assets, index or
interest rates. These instruments are used for different kinds of purposes like
forwards, futures, options, swaps, and variations.
What are the distinctions
between various types of financial markets according to their function? Explain
them.
-Capital Markets: is a
money market where debt is bought and sold. These transactions are managed by
the financial sector.
-Secondary Markets: this
financial market is where all of the stock, options, and futures are bought and
sold.
What does the “flow of
funds” refer to? Explain in detail.
This is an indicator for all the
government must have. It is measured periodically, and the result of this
measures give “balance sheets” that explain the aggregate assets and
liabilities for the financial and nonfinancial sectors.
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