14-1. what are financial markets? What function do they perform? How would an economy be worse off without them?
Financial markets are institutions and procedures that facilitate transactions in all types of financial claims. (Financial Management: Principles and Applications) This is a mechanism that is used to facilitate the transfer of savings from those economic units with a surplus to those with a deficit. If we didn’t have financial markets people or companies couldn’t buy houses, life insurance policies, governments or firms couldn’t spend more money than what they actually earned. The text says that the economy would suffer without a developed financial market system. That the rate of capital formation would not be as high if financial markets did not exist.

14-2. Define in a technical sense what we mean by financial intermediary. Give an example of your definition.
The financial intermediary collects the savings of individuals and issues its own (indirect) securities in exchange for these savings. The intermediary then uses the funds collected from the individual savers to acquire the business firm’s (direct) securities, such as stocks and bonds. I think an example would be a business giving a direct payment in a savings bond that the employee can match and put the same amount into the same savings plan.

14-3. Distinguish between the money and capital markets.
Money market refers to all institutions and procedures that provide for transactions in short-term debt instruments generally issued a by borrowers with very high credit ratings. Capital markets refer to all institutions and procedures that provide for transactions in long-term financial instruments. (Financial Management: Principles and Applications)

14-4 What major benefits do corporations and investors enjoy because of the existence of organized security exchanges?
Because of organized security exchanges corporations and investors will benefit due to providing a continuous market, establishing and publicizing fair security prices and they help business raise new capital.

14-7 What is an investment banker, and what major functions does he or she perform?
An investment banker is a financial specialist who underwrites and distributes new securities and advises corporate clients and raising external financial capital. (Financial Management: Principles and Applications), this person is the “middle person” by facilitating the flow of savings from those economic units that want to invest to those unites that want to raise funds.

I chose an article about investment bankers. http://www.businessweek.com/managing/content/jun2011/ca20110624_973360.htm
This article talked about a man who was an investment banker and chose to stop his career to become a comedian. He states that as an investment banker and a comedian that both people have three similar traits, brutal honesty, vulnerability and allowing different voices to be heard. Investment bankers seem to “sugarcoat uncomfortable truths with clients or themselves” (businessweek.com). This article continues to talk about the similarities between bankers and comedians and although it’s a stretch to how it relates to my assignment it gave me a better understand of what an investment banker does. A banker helps to make financial goals happen, such as investments and owning a house however bankers have a formula of numbers that work that says what each income should be able to afford; however that isn’t’ always true. This article talked about that trait that bankers are not always truthful however without a budget how would a customer of that banker know that? Investment bankers, budgets, financial markets all have connections in the financial world.