Assignment - 5- MONEY, FOREIGN EXCHANGE, FINANCE.

TASK 1

Student’s Name: Verónica Navarro Cárdenas 

Nua: 313450

After watching the video, answer the following questions in complete sentences.

 What is Finance?

It´s a monetary resource comprising debt and ownership funds of the State, company or person.

 What is Financial System?

It´s the system that handles financial transactions and the exchange of money between savers, investors, lenders and borrowers. 

 What are the functions of a financial system?

- Provides a payment system for the exchange of goods and services in the economy.

- Provides a mechanism to pull the funds in terms of household saving for corporate investments.

- Provides a financial capital for long-term capital formation for the government and business organizations.

- Facilitates the investors and other market participants to liquidate their investment alternatives like stocks and bonds.

- Provides the avenues for managing the risks faced by the market participants.
- Takes care of both short- and long-term needs of the market participants.

- Supplies the required financial capital to government for public expenditure on the social welfare activity, infrastructure development etc.

-Provides the financial services which means that it tries to provide a certain kind of service to the different stakeholders to maximize their return o to fulfill their requirements in terms of financial requirements.

-Integrate stakeholders for the transaction purpose and to exchange money between them. Make a relationship between the different stakeholders.

 How are the main types of financial institutions categorized? Describe each one.

Regulatory: their works is to oversee the functioning and fairness of financial markets and the firms that engage in financial activity.

Intermediaries: Are those who provide a middle ground between two parties in any financial transaction. They lend money as well as mobilize savings.

Non – intermediaries: Are those institutions that do the loan business, but their resources are not directly obtained from the savers. They don’t directly interact with the savers or the investors.

 Which are the main classes of financial instruments issued in a financial system? Describe them in detail.

- Derivative instruments have values determined from underlying assets like resources.

- Cash instruments are financial instruments with values that are directly influenced by market conditions.

- Foreign exchanges are represented on the foreign market and are constructed by currency agreements. 

 What are the distinctions between various types of financial markets according to their function? Explain them.

- Money and Capital Markets:

This conventional distinction is based on the differences in the periods of maturity of financial assets issued in these markets.

While the money markets deal in the short-.term claims (with a period of maturity of one year or less), the capital markets does so in the long-term (maturity periods above 1 year) claim.

Primary and Secondary Markets:

Primary markets deal in the new financial claims or new securities.

Secondary markets deal in securities already issued or existing or outstanding.

 What does the “flow of funds” refer to? Explain in detail. 

They are financial accounts used to monitor the flow of various sectors of the national economy. The data obtained from the flow of funds is analyzed by a central bank and published so that they are available to all citizens of a nation.

 Write a final reflection on the topic, mentioning what were the most important aspects you learned.

It is very useful to know how financial systems work, since they form an important part of the economy that governs a country, since financial systems can vary certain rules to the country that governs it.

The institutions that compose it, the functions and services they offer in order to have a better understanding of these.

It was very interesting for me to see this video, since I was unaware of all the activities they carry out.