My brother is working at an investment bank. The bank name is ZHESHANG SECURITIES. Customers can make transaction in its system platform such as bonds, stocks and futures. When customers make a transaction in its system, the bank receives a service fee from the process of transaction. A part of fee is prize and salary for staff and the rest of fee is operation cost for development of facility. However, customers cannot store their money in investment bank. So, how do customers use their money to make transaction in system? Cash is not a good answer. It is too simple. Clients need to have a new cash account in investment bank. The account is used in capital market and it not allows clients to make the transaction about cash to cash. For example, you can make a transaction such as cash to stocks and stocks to cash. So, where is the money? The answer is commercial bank. I am not sure it is a true answer, but it is only an answer which I know it. Clients need to link cash account to the commercial bank account. Also, they make a contract with commercial bank. The contract indicates that clients can withdraw money from saving account to make transaction in capital market. This means clients can use their money between investment bank and commercial bank. Investment bank also provides advisor service. The service includes mergers and acquisition transactions. Many people don’t know investment bank can make a loan to customers. However, only a few clients will borrow money from
Money and Banking
Old Exam Solutions - Chapter 5
Fill in the Blanks (NO EXPLANATIONS)
1. An increase in inflation expectations would (shift the bond demand curve left / shift the
bond demand curve right / have no eﬀect on the bond demand curve) and (shift the bond supply
curve left / shift the bond supply curve right / have no eﬀect on the bond supply curve).
2. An increase in inflation expectations lead to (an increase in / a decrease in / no eﬀect on / an
ambiguous eﬀect on) bond prices.
The use of money and its transmission through the economy by means of a banking system characterise modern economies. Money has been used for thousands of years, but has evolved to more sophisticated forms and its transmission has improved over time. There have long been questions over the effects money and banking have in the economy. Frequently they have given rise to intense debate, and are seldom far from discussion on the economy's performance, prices, exchange-rates and so on. The British…
2. Business Cycle- a cycle or series of cycles of economic expansion and contractions.
3. Moral Hazard- lack of incentive to guard against risk where one is protected from its consequences.
4. Compare and contrast wealth and income: Income is money that you receive from other sources besides the hourly wage or salary. This includes interest, dividends, bonuses, property appreciation, etc. Wealth is a way to measure what your assets are worth. Such as your home, savings, checking accounts, investment…
terms of two aspects. First of all, the major participants are different. While unsophisticated investors like us tend to be the ones demanding our deposits in a traditional bank run, institutions like hedge funds and firms are the ones asking back money from Bear. Secondly, the deposits in the bank are now insured up to $250,000 by FDIC but the funds invested in Bear is not. Thus, this makes a “bank run” on Bear more likely to erupt, even to the slightest rumor. Furthermore, the investors are more…
BEE2028/BEE3043 Money and Banking 1
October 25, 2013
• This assignment consists of short questions. Answer ALL the questions.
• The expected total length of your paper is 1000-1500 words. Numbers,
mathematical symbols and equations also count as one word. For example,
if you say “Let x be the price of an apple so x=100,” it counts as 10 words.
The maximum limit is 2499 words and the part that goes beyond this limit
is subject to truncation by the markers.
• Your answers should…
Money and Banking Term Paper
A financial crises is when a number of factors lead to a group of important financial assets such as stocks, bonds, or even currency lose their value in a short and usually unexpected time. These crises are usually precipitated by mistakes and people overlooking very key economic indicators. When a financial crises hits our nation or really any nation there are feelings of uncertainty and stress among investors and citizens alike because…
Governments usually borrow by issuing securities, government bonds and bills, to raise money. Making sure that the interest rate remains at the very low level by keeping the demand the same. The question Is how the government is going to keep the interest low? And from where is going to get money?
Basically the government's promised that the demand is going to remain the same by buying bonds. And printing more money, which is going to affect the value of the dollar, the investment in US, and the strangulation…
Chapter 1: Why Study Money, Banking and Financial Markets?
Financial Markets – markets in which funds are transferred from people who have an excess of available funds to people who have a shortage
- ex. Bond and stock markets; these are crucial to promoting greater economic efficiency
Security (financial instrument) – claim on the issuer’s future income or assets
Bond – debt security that promises to make payments periodically for a specified period of time
Interest Rate – cost of borrowing…
"Briefly explain ‘Fractional Reserve Banking’ and discuss how shifts in bank reserve ratios can be used as a fiscal policy tool to stimulate/dampen economic activity."
Fractional reserve banking is a banking system in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal. This is done to expand the economy by freeing up capital that can be loaned out to other parties. Most countries operate under this type of system. It is the primary mode…