Dr. Marcus Crawford
FIN 350 – Finance Markets and Institutions
Financial Markets and Institutions
Financial Market Role Financial market is a market in which people and entities can trade financial securities. There are general markets and specialized markets. There are several types of financial markets capital, commodity, money, derivatives, futures, and insurance and foreign exchange markets. These types of financial markets play an intricate part in creating economic wealth. Real economic resources from lenders to borrowers are transferred by the facilitation of the financial markets. They allow lenders access to gain interest from their surplus invisible funds and this causes an increase to individual which is an economic gain.
A money market fund is a type of fixed income mutual fund that invests in debt securities that are characterized by their short maturities and minimal credit risk. Money markets are savings account that will help with future retirements and they pay higher interest. Your money is always safe no matter if the bank closes because it is insured by the FDIC. Another financial market that helps creates wealth is capital market securities.
Capital market securities are your stocks and bonds and are traded in separate markets. In order to raise funds for various purposes companies, corporations and government use market securities. Capital market securities are supervised in every country by regulatory authorities. In the debt securities dealing bond is the medium. There is a vast of bonds in the international market. There are several types of bonds such as corporate, municipal, government bonds and many more.
Stocks are also important capital market securities. Stocks are preferred by the investors because they can get huge returns from this capital market instrument. Trading of company stocks, other securities and derivatives is what the stock market is used for. Companies raise funds for certain purposes in the stock market. The stock market is sometimes turned to by the government to generate funds.
Securities There are a few types of securities in the financial market such as, debt security markets, equity markets and derivative security markets. Money markets, bond markets and mortgage markets are types of debt security markets. “Money market securities are debt securities with a maturity of one year or less (Madura, 2012, p.123).” The first financial market security I am researching is Cigna. Cigna Corporation is a global health service company that provides insurance and related products and services dedicated to improve health, well-being and sense of security. “The $16 billion market cap health insurer is up 25% in the last year, essentially doubling the market’s performance (Doiron, 2013).” The current market price for Cigna is about $87.17. Another financial market security is the world’s largest investment management company Vanguard. They offer a large selection of low cost mutual funds and other related services to all types of people such as investors, individuals, financial professionals and others. It was founded in 1975 and as of today is has assets of 2 trillion in U.S. and international mutual funds. Their core purpose is to “take a stand for all investors, to treat them fairly, and to give them the best chance for investment success (Vanguard, 2013).”
The last security I am interested in researching is Bank of America. The current market price for Bank of America Corp is about $15.59. The original name of was Massachusetts Bank which opened in 1784. At the time it was only one of the three commercial banks that existed in the U.S. Over the years the bank has grown to the successful financial institution it is today. Today it is services individual consumers, small and middle market businesses and large corporations as one of the largest financial institutions. The stock is listed