Nonbank Financial Intermediaries - PowerPoint PPT Presentation

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Nonbank Financial Intermediaries

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  1. Nonbank Financial Intermediaries • Finance Company- make loans directly to consumer • Life Insurance • Mutual Funds- sells stock in itself and invests in other stocks and bonds. • Pension Funds- income security to someone who has worked a certain number of years • Real Estate Investment(REIT)- loans to construction companies

  2. Investment Considerations • Risk and Return • Objective • Consistency • Complexity

  3. Bonds • Coupon- interest • Maturity- life • Par Value- dollar value • Corporate, Municipal and Government

  4. Certificate of Deposit(CD) • Loans made to financial institutions • Time sensitive • FDIC insured

  5. Money Market • Mutual fund • Not FDIC insured • Higher interest rate

  6. Treasuries • US Government borrowing money • Seen as very safe investment

  7. Individual Retirement Accounts (IRA) • Long term tax shelters used for retirement

  8. Organized Stock Exchanges • New York (NYSE) • American (AMEX) • Regional • Global • National Association of Securities Dealers Automated Quotations (NASDAQ) • Over the Counter (OTC)

  9. Dow-Jones Industrial Average (DJIA) • 30 active, reputable, large, reflective stocks on NYSE

  10. Stand + Poor’s 500 • Larger, covers AMEX, OTC, NYSE

  11. Money • Medium of Exchange • Standard of Value • Store of Value • Standard of deferred payment

  12. Money Standard • Gold Standard • Fiat Money Standard

  13. M1 • Currency, demand deposits, and traveler’s checks • Quick cash

  14. M2 • M1+savings, time deposits (CD’s) and money markets • Not as liquid

  15. M3 • M2+large-demnomination times deposits • $100,000 or more

  16. Demand for Money • Price level of goods • Income • Interest rates • Credit availability

  17. Demand for Money • Transactions motive • Daily spending • Precautionary motive • Emergency money • Speculative motive • Future

  18. Investments • Stocks • Bonds • Commodities