american financial system

8/4/2019 American Financial System

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AMERICAN FINANCIAL SYSTEM


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U.S. ECONOMY The economy of the United States is the world's

largest national economy.

Currency- United States Dollar(USD)

GDP growth- 3.0% 5th of global GDP at purchasing power parity.

Per capita GDP(PPP)- 6th highest in the world.


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FEDERAL RESERVE SYSTEM The Federal Reserve System (also known as the

Federal Reserve, and informally as the Fed) is thecentral banking system of the United States.

It was created in 1913 with the enactment of the

Federal Reserve Act. Duties are to conduct the nation's monetary policy,

supervise and regulate banking institutions, maintainthe stability of the financial system and provide

financial services to depository institutions, the U.S.government, and foreign official institutions.

Headquarters- Washington, D.C.

Chairman- Ben Bernanke


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FINACIAL SYSTEM

The financial systemis theprocess by which money flows

from savers to users


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TYPES OF SECURITIES

Securities Financial instruments

Obligations on the part of the issuer Businesses and Governments

Provide rate of return to purchasers

Money Market Instruments

Bonds

Stock


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MONEY MARKAT INSTRUMENT Short-term Debt Securities Issued by governments, financial institutions and

corporations

Investors are paid interest for the use of theirfunds.

Generally low-risk

U.S. Treasury bills

Commercial paper

Bank certificates of deposit


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BONDS Government Bonds Bonds sold by the U.S. Department of the Treasury.

Municipal Bonds

Bonds issued by state or local governments Revenue bonds are used toward a project that will produce

revenue, General Obligation Bonds are not.


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STOCKS Common stock

ownershipclaims in

corporations.

Vote on major company decisions

Cash dividends

Price appreciation

Preferred stock stockholders with preference

in the payment of dividends.


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CONVERTIBLE SECURITIES

Stockholder has the right

to exchange the bond orpreferred stock for a fixed

number of shares ofcommon stock


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FINANCIAL MARKETS Primary Market

firms and governments issue

securities and sell them initially to the public.

When a firm offers a stock for sale to the generalpublic for the first time.

Secondary Market collection of financialmarkets in which previously issued securities are

traded among investors.


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STOCK MARKETS

Stock market (exchange)

market in which common stocksare traded, such as the New York

Stock Exchange


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STOCK EXCHANGES The New York Stock Exchange

the Big Board is

the most famous and one of the oldest stock marketsin the world. More than 3,000 stocks are listed onNYSE.

The Nasdaq Stock Market the second largeststock market. Over 5,000 companies have theirstocks listed on Nasdaq but many are smaller firms.

Other U.S. Stock Markets The American Stock Exchange/AMEX

Regional Stock Exchanges

Foreign Markets


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FINANCIAL INSTITUTIONS

Commercial Banks

Savings Banks and Credit Unions

Non-depository Institutions


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SAVINGS BANKS & CREDIT

UNIONS

Offer a variety of consumer services

85% of their loans are real estate loans

Credit unions are cooperative financialinstitutions that are owned bydepositors/members.

Credit unions are created to serve consumers. Insured by National Credit Union Administration

(NCUA) which functions the same as the FDIC


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NON DEPOSITORY FINANCIALINSTITUTIONS

Insurance Companies

Pension Funds

Finance Companies


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american financial system

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