8th
c Edition
SOLUTION MANUAL FOR
FINANCIAL MARKETS AND INSTITUTIONS 8TH EDITION ANTHONY
SAUNDERS
I. Chapter cOutline
1. Why cStudy cFinancial cMarkets cand cInstitutions? cChapter cOverview
2. Overview cof cFinancial cMarkets
a. Primary cMarkets cversus cSecondary cMarkets
b. Money cMarkets cversus cCapital cMarkets
c. Foreign cExchange cMarkets
d. Derivative cSecurity cMarkets
e. Financial cMarket cRegulation
3. Overview cof cFinancial cInstitutions
a. Unique cEconomic cFunctions cPerformed cby cFinancial cInstitutions
b. Additional cBenefits cFIs cProvide cto cSuppliers cof cFunds
c. Economic cFunctions cFIs cProvide cto cthe cFinancial cSystem cas ca cWhole
d. Risks cIncurred cby cFinancial cInstitutions
e. Regulation cof cFinancial cInstitutions
f. Trends cin cthe cUnited cStates
4. Globalization cof cFinancial cMarkets cand cInstitutions
Appendix c1A: cThe cFinancial cCrisis: cThe cFailure cof cFinancial cInstitutions‘
cSpecialness c(available cthrough cMcGraw cHill‘s cConnect. cContact cyour cMcGraw cHill
crepresentative cfor cmore cinformation con cmaking cthe cappendix cavailable cto cyour
cstudents).
II. Learning cGoals
1. Differentiate cbetween cprimary cand csecondary cmarkets.
2. Differentiate cbetween cmoney cand ccapital cmarkets.
3. Understand cwhat cforeign cexchange cmarkets care.
4. Understand cwhat cderivative csecurities cmarkets care.
Copyright c© c2022 cMcGraw cHill cEducation. cAll crights creserved. cNo
creproduction cor cdistribution cwithout cthe cprior cwritten cconsent cof
cMcGraw cHill.
1-1
, 8th
c Edition
5. Distinguish cbetween cthe cdifferent ctypes cof cfinancial cinstitutions.
6. Know cthe cservices cfinancial cinstitutions cperform.
7. Know cthe crisks cfinancial cinstitutions cface.
8. Appreciate cwhy cfinancial cinstitutions care cregulated.
9. Recognize cthat cfinancial cmarkets care cbecoming cincreasingly cglobal.
Copyright c© c2022 cMcGraw cHill cEducation. cAll crights creserved. cNo
creproduction cor cdistribution cwithout cthe cprior cwritten cconsent cof
cMcGraw cHill.
1-1
, 8th
c Edition
III. Chapter cin cPerspective
This cchapter chas cthree cmajor csections cand cone cminor csection. cThe ctext
cprovides ca cgeneral coverview cof cthe cmajor ctypes cof cU.S. cfinancial cmarkets, cfocusing
cprimarily con cterminology cand cdescriptions cof cthe cmajor csecurities, cmarket cstructures
cand cregulators. cMarket cmicrostructure cis cnot cdiscussed. cForeign cexchange
ctransactions care calso cbriefly cintroduced. cSecond, cthe cchapter cdescribes cthe cvarious
ctypes cof cfinancial cinstitutions cand cexplains cthe crisks cthey cface cand cthe cservices
cthey cprovide cto cfunds‘ cusers cand cfunds‘ csuppliers. cThe cfinancial ccrisis cis cdiscussed
cand cthe cimpact cof cBrexit cis cconsidered. cThe cfinal csection cof cthe cchapter cprovides
cstatistics cabout cthe crapid cgrowth cof cglobalization cof cboth cmarkets cand cinstitutions.
cAn cappendix ccovering cthe cdetails cof cthe cfinancial ccrisis cand cthe cgovernment
cintervention cprograms, cincluding cthe ccosts cas cof clate c2009, cis cavailable cthrough
cMcGraw cHill‘s cConnect. cContact cyour cMcGraw cHill crepresentative cfor cmore
cinformation con cmaking cthe cappendix cavailable cto cyour cstudents.
IV. Key cConcepts cand cDefinitions cto cCommunicate cto cStudents
Financial cmarkets Primary cmarkets
Initial cpublic cofferings c(IPO) Secondary cmarkets
Derivative csecurity Liquidity
Money cmarkets Over-the-counter c(OTC) cmarkets
Capital cmarkets Derivative csecurity cmarkets
Financial cinstitutions Direct ctransfer
Price crisk Indirect ctransfer
Delegated cmonitor Asset ctransformers
Diversify Economies cof cscale
Enterprise crisk cmanagement c(ERM)
Appendix cterms cinclude:
TARP Federal cReserve cRescue cEfforts
Federal cStimulus cprograms American cInternational cGroup
FDIC cBank ctakeovers Other cfinancial
cinitiatives cOther chousing cinitiatives
Copyright c© c2022 cMcGraw cHill cEducation. cAll crights creserved. cNo
creproduction cor cdistribution cwithout cthe cprior cwritten cconsent cof
cMcGraw cHill.
1-1
, 8th
c Edition
V. Teaching cNotes
a. Why cStudy cFinancial cMarkets cand cInstitutions?
For can ceconomy cto cachieve cits cpotential cgrowth crate, cmechanisms cmust cexist
cto ceffectively callocate ccapital c(a cscarce cresource) cto cthe cbest cpossible cuses cwhile
caccounting cfor cthe criskiness cof cthe copportunities cavailable. cMarkets cand cinstitutions
chave cbeen ccreated cto cfacilitate ctransfers cof cfunds cfrom ceconomic cagents cwith
csurplus cfunds cto ceconomic cagents cin cneed cof cfunds. cFor can ceconomy cto cmaximize
cits cgrowth cpotential cit cmust ccreate cmethods cthat cattract csavers‘ cexcess cfunds cand
cthen cput cthose cfunds cto cthe cbest cuses cpossible, cotherwise cidle ccash cis cnot cused cas
cproductively cas cpossible. cThe cfunds ctransfer cshould coccur cat cas clow ca ccost cas
cpossible cto censure cmaximum ceconomic cgrowth. cTwo ccompeting calternative cmethods
cexist: cdirect cand cindirect cfinancing. cIn cdirect cfinancing cthe cultimate cfunds csupplier
cpurchases ca cclaim cfrom cthe cfunds cdemander cwith cor cwithout cthe chelp cof can
cintermediary csuch cas can cunderwriter. cIn cthis ccase, csociety crelies con cprimary
cmarkets cto cinitially cprice cthe cissue cand cthen csecondary cmarkets cto cupdate cthe
cprices cand cprovide cliquidity. cTrustees care cappointed cto cmonitor ccontractual
cobligations cof cissuers c and cinstigate cenforcement cactions cfor cbreach cof ccontract
cterms. cIn cindirect cfinancing, cthe cfunds cdemander cobtains cfinancing cfrom ca cfinancial
cintermediary. cThe cintermediary cand cthe cborrower cnegotiate cthe cterms cand ccost. cThe
cintermediary cobtains cfunds cby coffering cdifferent cclaims cto cfund csuppliers. cIn cthis
ccase cthe cintermediary cis cusually cresponsible cfor cmonitoring cthe ccontractual
cconditions cof cthe cfinancing cagreement cand cperhaps cupdating cthe ccost cif cappropriate.
Copyright c© c2022 cMcGraw cHill cEducation. cAll crights creserved. cNo
creproduction cor cdistribution cwithout cthe cprior cwritten cconsent cof
cMcGraw cHill.
1-2
c Edition
SOLUTION MANUAL FOR
FINANCIAL MARKETS AND INSTITUTIONS 8TH EDITION ANTHONY
SAUNDERS
I. Chapter cOutline
1. Why cStudy cFinancial cMarkets cand cInstitutions? cChapter cOverview
2. Overview cof cFinancial cMarkets
a. Primary cMarkets cversus cSecondary cMarkets
b. Money cMarkets cversus cCapital cMarkets
c. Foreign cExchange cMarkets
d. Derivative cSecurity cMarkets
e. Financial cMarket cRegulation
3. Overview cof cFinancial cInstitutions
a. Unique cEconomic cFunctions cPerformed cby cFinancial cInstitutions
b. Additional cBenefits cFIs cProvide cto cSuppliers cof cFunds
c. Economic cFunctions cFIs cProvide cto cthe cFinancial cSystem cas ca cWhole
d. Risks cIncurred cby cFinancial cInstitutions
e. Regulation cof cFinancial cInstitutions
f. Trends cin cthe cUnited cStates
4. Globalization cof cFinancial cMarkets cand cInstitutions
Appendix c1A: cThe cFinancial cCrisis: cThe cFailure cof cFinancial cInstitutions‘
cSpecialness c(available cthrough cMcGraw cHill‘s cConnect. cContact cyour cMcGraw cHill
crepresentative cfor cmore cinformation con cmaking cthe cappendix cavailable cto cyour
cstudents).
II. Learning cGoals
1. Differentiate cbetween cprimary cand csecondary cmarkets.
2. Differentiate cbetween cmoney cand ccapital cmarkets.
3. Understand cwhat cforeign cexchange cmarkets care.
4. Understand cwhat cderivative csecurities cmarkets care.
Copyright c© c2022 cMcGraw cHill cEducation. cAll crights creserved. cNo
creproduction cor cdistribution cwithout cthe cprior cwritten cconsent cof
cMcGraw cHill.
1-1
, 8th
c Edition
5. Distinguish cbetween cthe cdifferent ctypes cof cfinancial cinstitutions.
6. Know cthe cservices cfinancial cinstitutions cperform.
7. Know cthe crisks cfinancial cinstitutions cface.
8. Appreciate cwhy cfinancial cinstitutions care cregulated.
9. Recognize cthat cfinancial cmarkets care cbecoming cincreasingly cglobal.
Copyright c© c2022 cMcGraw cHill cEducation. cAll crights creserved. cNo
creproduction cor cdistribution cwithout cthe cprior cwritten cconsent cof
cMcGraw cHill.
1-1
, 8th
c Edition
III. Chapter cin cPerspective
This cchapter chas cthree cmajor csections cand cone cminor csection. cThe ctext
cprovides ca cgeneral coverview cof cthe cmajor ctypes cof cU.S. cfinancial cmarkets, cfocusing
cprimarily con cterminology cand cdescriptions cof cthe cmajor csecurities, cmarket cstructures
cand cregulators. cMarket cmicrostructure cis cnot cdiscussed. cForeign cexchange
ctransactions care calso cbriefly cintroduced. cSecond, cthe cchapter cdescribes cthe cvarious
ctypes cof cfinancial cinstitutions cand cexplains cthe crisks cthey cface cand cthe cservices
cthey cprovide cto cfunds‘ cusers cand cfunds‘ csuppliers. cThe cfinancial ccrisis cis cdiscussed
cand cthe cimpact cof cBrexit cis cconsidered. cThe cfinal csection cof cthe cchapter cprovides
cstatistics cabout cthe crapid cgrowth cof cglobalization cof cboth cmarkets cand cinstitutions.
cAn cappendix ccovering cthe cdetails cof cthe cfinancial ccrisis cand cthe cgovernment
cintervention cprograms, cincluding cthe ccosts cas cof clate c2009, cis cavailable cthrough
cMcGraw cHill‘s cConnect. cContact cyour cMcGraw cHill crepresentative cfor cmore
cinformation con cmaking cthe cappendix cavailable cto cyour cstudents.
IV. Key cConcepts cand cDefinitions cto cCommunicate cto cStudents
Financial cmarkets Primary cmarkets
Initial cpublic cofferings c(IPO) Secondary cmarkets
Derivative csecurity Liquidity
Money cmarkets Over-the-counter c(OTC) cmarkets
Capital cmarkets Derivative csecurity cmarkets
Financial cinstitutions Direct ctransfer
Price crisk Indirect ctransfer
Delegated cmonitor Asset ctransformers
Diversify Economies cof cscale
Enterprise crisk cmanagement c(ERM)
Appendix cterms cinclude:
TARP Federal cReserve cRescue cEfforts
Federal cStimulus cprograms American cInternational cGroup
FDIC cBank ctakeovers Other cfinancial
cinitiatives cOther chousing cinitiatives
Copyright c© c2022 cMcGraw cHill cEducation. cAll crights creserved. cNo
creproduction cor cdistribution cwithout cthe cprior cwritten cconsent cof
cMcGraw cHill.
1-1
, 8th
c Edition
V. Teaching cNotes
a. Why cStudy cFinancial cMarkets cand cInstitutions?
For can ceconomy cto cachieve cits cpotential cgrowth crate, cmechanisms cmust cexist
cto ceffectively callocate ccapital c(a cscarce cresource) cto cthe cbest cpossible cuses cwhile
caccounting cfor cthe criskiness cof cthe copportunities cavailable. cMarkets cand cinstitutions
chave cbeen ccreated cto cfacilitate ctransfers cof cfunds cfrom ceconomic cagents cwith
csurplus cfunds cto ceconomic cagents cin cneed cof cfunds. cFor can ceconomy cto cmaximize
cits cgrowth cpotential cit cmust ccreate cmethods cthat cattract csavers‘ cexcess cfunds cand
cthen cput cthose cfunds cto cthe cbest cuses cpossible, cotherwise cidle ccash cis cnot cused cas
cproductively cas cpossible. cThe cfunds ctransfer cshould coccur cat cas clow ca ccost cas
cpossible cto censure cmaximum ceconomic cgrowth. cTwo ccompeting calternative cmethods
cexist: cdirect cand cindirect cfinancing. cIn cdirect cfinancing cthe cultimate cfunds csupplier
cpurchases ca cclaim cfrom cthe cfunds cdemander cwith cor cwithout cthe chelp cof can
cintermediary csuch cas can cunderwriter. cIn cthis ccase, csociety crelies con cprimary
cmarkets cto cinitially cprice cthe cissue cand cthen csecondary cmarkets cto cupdate cthe
cprices cand cprovide cliquidity. cTrustees care cappointed cto cmonitor ccontractual
cobligations cof cissuers c and cinstigate cenforcement cactions cfor cbreach cof ccontract
cterms. cIn cindirect cfinancing, cthe cfunds cdemander cobtains cfinancing cfrom ca cfinancial
cintermediary. cThe cintermediary cand cthe cborrower cnegotiate cthe cterms cand ccost. cThe
cintermediary cobtains cfunds cby coffering cdifferent cclaims cto cfund csuppliers. cIn cthis
ccase cthe cintermediary cis cusually cresponsible cfor cmonitoring cthe ccontractual
cconditions cof cthe cfinancing cagreement cand cperhaps cupdating cthe ccost cif cappropriate.
Copyright c© c2022 cMcGraw cHill cEducation. cAll crights creserved. cNo
creproduction cor cdistribution cwithout cthe cprior cwritten cconsent cof
cMcGraw cHill.
1-2
