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Eco 212 Money & Banking Fall 2008. Course information Course policies. Who am I?. Dr. Anwar Al-Shriaan alshriaan@cba.edu.kw Office hours: MW 12:30-1:30, and by appt. About this course. Intro Financial markets Interest rates, exchange rates, stock market, derivatives

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eco 212 money banking fall 2008
Eco 212 Money & BankingFall 2008
  • Course information
  • Course policies
who am i
Who am I?
  • Dr. Anwar Al-Shriaan
  • alshriaan@cba.edu.kw
  • Office hours:
    • MW 12:30-1:30,
    • and by appt.
about this course
About this course
  • Intro
  • Financial markets
    • Interest rates, exchange rates, stock market, derivatives
  • Financial institutions
    • structure, regulation
  • Federal Reserve System & monetary policy
  • Role of money in the economy
course materials
Course materials
  • required:
    • textbook
    • Mishkin, Frederic S., "The Economics of Money, Banking, and Financial Markets." Sixth edition, Addison Wesley (2001).
    • in bookstores
slide5
recommended:
    • course web site
      • It’s free!
      • Address on syllabus
    • course email list
    • Email me with ur name and ur class time
grading
Grading
  • Point Structure:
  • Class Participation & Attendance 10 points
  • Homework and Quizzes 10 points
  • Exam 1 20 points
  • Exam 2 20 points
  • Final Exam 40 points
slide7
grading scale in syllabus
  • extra credit
    • About 10 pts. during the semester
    • must be present in class when assigned
  • attendance is graded and important to earn extra credits,
makeups
Makeups
  • one week’s notice (except emergencies)
  • require documented excused absence
  • may be essay exams or I may reweight the other exams
attendance
Attendance
  • explicitly graded
  • I expect regular attendance & punctuality
    • homework due at beginning of class
  • you are responsible for information in class
  • extra credit only available to those in attendance when it is offered
cheating
Cheating
  • cheating on an exam means a failing grade in the course
  • copied or very identical homework will receive a zero
having problems in the course
Having problems in the course?
  • see me sooner, not later!

Need accomodation?

  • see me after class or in my office
chapter 1 intro to money the financial system
Chapter 1: Intro to Money & the Financial System
  • 5 Core Principles of Money & Banking
    • Time has value
    • Risk requires compensation
    • Information is the basis for decisions
    • Markets set prices and allocate resources
    • Stability improves welfare
in the news
in the news…
  • Subprime lending market meltdown
    • impact on mortgage markets
    • Impact on financial institutions
    • impact on the stock market
    • impact on the economy
slide14
The U.S. dollar
    • parity with the Canadian $!
    • Revaluation of the Chinese yuan?
  • Federal Reserve Chair Ben Bernanke
    • Reduction of federal funds rate
      • Largest since 1984
    • A re-emergence of stagflation?
1 time has value
1. Time has value
  • $100 today vs. $100 in one year
    • Are you indifferent?
  • Forensic economics
  • Value of a financial instrument depends on SIZE and TIMING of payments
example hgtv
Example: HGTV
  • My House is Worth What?
    • House purchased 2001: $225,000
    • Renovations over 5 years: $41,000
    • Estimated current value: $350,000
    • Profit: $84,000…..Really?
      • NO! not really!
2 risk requires compensation
2. Risk requires compensation
  • Risk comes from uncertainty
  • Risk is unavoidable
  • We don’t like it.
slide22
To take on risk, we demand compensation
    • Subprime mortgage rates > prime mortgage rates
  • We pay to avoid certain risks
    • Auto, life insurance
    • Low rates on checking, savings accounts
slide23
The value of a financial asset depends on the
    • size,
    • timing, and
    • CERTAINTY

of its payments.

3 information is the basis for decisions
3. Information is the basis for decisions
  • Rational decisions use all available info
  • Asymmetric info can impede markets
  • Financial institutions play a big role in gathering info
  • Financial regulation demands disclosure of certain info
4 markets set prices and allocate resources
4. Markets set prices and allocate resources
  • Eco 110!
  • Markets set a price that rations scarce resources
    • Prices send a signal
  • Financial market prices allocate funds
5 stability improves welfare
5. Stability improves welfare
  • Back to #2—we do not like uncertainty
  • Financial stability feeds economic growth and standards of living
    • Role of institutions, Federal Reserve