Assume that you recently graduated with a Bachelor’s degree in finance and have just reported to work as a financial investment adviser at the brokerage firm of Willox Financial & Co. Your first assignment is to explain the nature of the U.S. financial markets to Manuel Jones, a professional basketball player who recently came to the US from Mexico. Mr. Jones is a highly ranked basketball player who expects to invest substantial amounts of money through Willox Financial. He is very intelligent; therefore, he would like to understand in general terms what will happen to his money. Your supervisor has developed the following questions that you must use to explain the U.S. financial system to Mr. Jones.
What are the three (3) primary ways in which capital is transferred between savers and borrowers? Describe each one.
What is a market? Differentiate between the following types of markets: physical asset markets versus financial asset markets, spot markets versus futures markets, money markets versus capital markets, primary markets versus secondary markets, and public markets versus private markets.
Why are financial markets essential for a healthy economy and economic growth?
What are derivatives? How can derivatives be used to reduce risk? Can derivatives be used to increase risk? Explain.
Briefly describe each of the following financial institutions: investment banks, commercial banks, financial services corporations, pension funds, mutual funds, exchange-traded funds, hedge funds, and private equity companies.
What are the two leading stock markets? Describe the two (2) basic types of stock markets.
