第01章 金融市场的作用(讲义)简易版.doc

Section 1.1 Text Significance of finance The word “finance” signifies capital in monetary form, that is, in the form of funds lent or borrowed, normally for capital purposes, through financial markets or financial institutions. When finance goes international, it is then an international finance. What is a financial market? It is a place where financial transactions take place. Financial markets facilitate the lending of funds from savers to those who wish to undertake investments. Those that wish to borrow to finance investment projects sell financial instruments to savers. Financial transactions International financial transactions include purchases and sales of foreign currency, securities, gold bullion, and lending and borrowing. Methods of raising funds Apart from borrowing from banks, a firm or an individual can obtain funds in a financial market in two ways. The most common method is to issue a debt instrument, such as a bond or a mortgage, which is a contractual agreement by the borrower to pay the holder of the instrument fixed amounts at regular intervals（interest and principal payments） until a specified date （the maturity date）, when a final payment is made. The second method of raising funds is by issuing equities, such as common stock, which are claim to share in the net income （income after expenses and taxes） and the assets of a business. Equities usually earn periodic payment （dividends） and are considered long-term securities because they have no maturity date. A primary market is a financial market in which new issues of a security, such as a bond or a stock, are sold to initial buyers by the corporation or government agency borrowing the funds. A secondary market is a financial market in which securities that have been previously issued （and are thus secondhand） can be resold. The secondary market serves two important functions. First, financial instruments are more liquid. The increased liquidity of the instruments makes them more desira