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Monetary Policy, the Supply of Money Is Broken Down Into Types of Money Based on How Much of an Effect Monetary Policy Can Have on That Type of Money

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Monetary Policy, the Supply of Money Is Broken Down Into Types of Money Based on How Much of an Effect Monetary Policy Can Have on That Type of Money BASIC FINANCE Dr. Marta Wiśniewska [email protected] Introduction Course Outline Literature Grading Introduction Course Outline Literature Grading This is an introductory finance module. It outlines the basic principles of (1) public finance (2) portfolio theory and (3) corporate finance. The main objective is to create awareness of financial choices faced by various agents. Introduction Course Outline Literature Grading Day Time Lectures PRACTICAL QUESTIONS 20.10 (1)Introduction (2)Money and Monetary Systems (3)Central Banks and Banking System (1)Time value of money 21.10 (4)Introduction to Portfolio Theory (5) Introduction to Investments (2) Risk and return 3.11 (6) Introduction to Public Finance (7) Finance of EU (8) Social Protection (9) Introduction to Corporate Finance 1.12 TEST Group Presentation/ Report Introduction Course Outline Literature Grading Levich, Richard M. (2003), International Financial Markets, Second Edition, McGraw Hill Brealey, Richard A. and Myers, Stewart C. (2003), Principles of Corporate Finance, Seventh Edition, McGrawHill Markowitz, Harry M. (1952). Portfolio Selection, Journal of Finance, 7 (1), 77-91. Sharpe, William F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk, Journal of Finance, 19(3), 425-442. Lintner, J. (1965). The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets, The Review of Economics and Statistics, 47 (1), 13-39. LECTURE NOTES Finanse, red. Ostaszewski J., Difin, Warszawa 2003; Owsiak S., Podstawy nauki finansów, PWE, Warszawa 2002. Fedorowicz Z., Podstawy teorii finansów, Poltext, Warszawa 2000; Finanse i prawo finansowe, t. 1 i 2, red. Ruśkowski E., KiK, Warszawa 2002; Groppelli A. A., Ehsan Niktakht, Wstęp do finansów, WIG PRESS, Warszawa 1999; Sektor finansowy w Polsce, red. Owsiak S., PWE, Warszawa 2002. Finanse, praca zbior., red. Ostaszewski J., Difin, 2003; Introduction Course Outline Literature Grading www.witor.biz/BF Introduction Course Outline Literature Grading (1)Group Presentation* (30%) (2)Test (70%) * obligatory Introduction Course Outline Literature Grading Country presentation- Requirements (1) Each group should choose one of the following countries: UK, USA, Japan, Germany, Norway (2) The presenation/ report should cover following issues: . Brief general introduction to the contry and its economy (incl. GDP, current economic situation, crisis?, population etc) . Country budget . Taxes . Pension system . Financial markets DUE: 1st December, pdf report submitted until 12pm 10-12 min presentation, all members of the group are presenting Introduction Course Outline Literature Grading Final Exam 2 Sections: Section 1 . Numerical tast . Answer all questions . 60% of exam mark . You decide what position you take: long, short . You decide for how long you hold the position (exit strategy) Section 2 . Describe/ explain question . Answer 2 out of 3 questions . 40% of exam mark see Exam Paper 2015 Introduction Course Outline Literature Grading Questions? Class 1: (1)Introduction (2)Money and Monetary Systems (3)Central Banks and Banking System PQ 1: Time value of money 1. Introduction Basic Finance: Introduction Marta Wisniewska . What Is Finance? . The Financial System . Financial Instruments . Financial Markets Basic Finance: Introduction Marta Wisniewska What is Finance? The science of managing money Finance is the study of how and under what terms savings (money) are allocated between lenders and borrowers. Financial contracts or securities occur whenever funds are transferred from issuer to buyer. Basic Finance: Introduction Marta Wisniewska What is Finance? Moving scarce resources over . time and . states of nature. Example: car loan time car insurance state of nature Basic Finance: Introduction Marta Wisniewska What is Finance? . The study of finance requires a basic understanding of: . Securities . Corporate law . Financial institutions and markets Basic Finance: Introduction Marta Wisniewska What is Finance? Real vs. Financial Assets Real assets Financial assets . tangible things owned by . what one persons and businesses individual has . Residential structures and lent to another property . Consumer credit . Major appliances and . Loans automobiles . Mortgages . Office towers, factories, mines . Machinery and equipment Basic Finance: Introduction Marta Wisniewska What is Finance? Real vs. Financial Assets Table 1-2 Assets and Liabilities of Households, 2005 Assets $ Billion Liabilities $ Billion Houses 1,086 Consumer credit 260 Consumer Durables 435 Loans 131 Land 827 Mortgages 588 Real Assets 2,348 Total Liabilities 979 Deposits 683 Debt 114 Pensions and insurance 1,200 Shares 1,254 Foreign and other 72 Financial Assets 3323 Total Assets 5,671 Source: Statistics Canada. National Balance Sheet Accounts, Quarterly Estimates, Fourth Quarter 2005. Ottawa: M inister of Industry, 2006 (Catalogue No. 13-214-XIE). Basic Finance: Introduction Marta Wisniewska What is Finance? Finance is used by Basic Finance: Introduction Marta Wisniewska What is Finance? Personal finance How do we obtain money? …and what do we do with money (spend? save?) Ways in which individuals or families obtain, budget, save and spend monetary resources over time, taking into account various financial risks and future life events. Basic Finance: Introduction Marta Wisniewska What is Finance? Corporate finance What project should the company undertake? …and how to pay for those projects The primary goal of corporate finance is to maximize corporate value while reducing the firm's financial risks. Basic Finance: Introduction Marta Wisniewska What is Finance? Public finance What should the government or collective organizations do or be doing? …and how to pay for those activities The broader term (public economics) and the narrower term (government finance) are also often used. Country, state, county, city or municipality finance is called public finance. Basic Finance: Introduction Marta Wisniewska The Financial System Overview Basic Finance: Introduction Marta Wisniewska The Financial System Overview The financial system facilitates the flow of capital between the entities with funds surplus and those in need of funds. Basic Finance: Introduction Marta Wisniewska The Financial System Overview . The household is the primary provider of funds to businesses and government. Households must accumulate financial resources throughout their working life times to have enough savings (pension) to live on in their retirement years . Financial intermediaries transform the nature of the securities they issue and invest in . Banks, trust companies, credit unions, insurance firms, mutual funds . Market intermediaries simply help make markets work . Investment dealers . Brokers Basic Finance: Introduction Marta Wisniewska The Financial System Overview The circulation of funds in the financial system may take place through different channels. Bank-oriented financial Market-oriented financial system system . Dominant role of banks . Capital is obtained through as institutions the financial market, where intermediating in the enterprises issue securities capital exchange (stocks/bonds). between entities in the . Investors may purchase them economy. directly on the financial . Germany, Japan market or through the intermediation of financial institutions . UK, USA Basic Finance: Introduction Marta Wisniewska The Financial System where financial Channels of Intermediation intermediary such as a bank direct offers deposit- transfer from taking services saver to and lends those borrower – a deposits out as non-market mortgages or transaction loans market- based transaction usually through a market intermediary such as a broker Basic Finance: Introduction Marta Wisniewska The Financial System Financial Intermediaries Banks and other deposit-taking Insurance institutions companies Pension Funds Mutual/ Investment Funds Basic Finance: Introduction Marta Wisniewska The Financial System Financial Intermediaries: Banks The deposits are ‘pooled’ in the Bank B A N K The bank takes these pooled funds Banks take deposits and lends them out to households from numerous and businesses in the form of depositors mortgages and loans The bank transforms the original nature of the savers (depositors) money: . Deposits are usually small in amount…face little or no risk, and depositors expect to withdraw the amount at any time . Loans and mortgages on the other hand usually have the following characteristics: . Large sums . Borrowed for long periods of time . Borrowed for risky purposes. Basic Finance: Introduction Marta Wisniewska The Financial System Financial Intermediaries: Insurance Companies They invest the premiums so that the accumulated value in the future will grow INSURANCE COMPANIES …to meet the Insurers sell policies and collect premiums from anticipated customers based on the pricing of those policies claims of the given the probability of a claim and the size the policyholders. policy and administrative fees. In this way, unsupportable risks (such as the death of wage earner or the burning down of a business) are shared among a large number of policyholders through the insurance company. Insurance allows households, business and government to engage in risky activities without having to bear the entire risk of loss themselves. Basic Finance: Introduction Marta Wisniewska The Financial System Financial Intermediaries: Pension Plans those funds are invested(?) to grow (?) over time… PENSION PLAN Individuals and employers
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