Contents

Preface

Acknowledgments

Chapter 1 An Introduction to Financial Institutions, Instruments, and Markets

The Role of an Economic System

A Command Economy

A Market Economy

Classification of Economic Units

An Economy's Relationship with the External World

The Balance of Trade

The Current Account Balance

Financial Assets

Primary Markets and Secondary Markets

Exchanges and OTC Markets

Brokers and Dealers

The Need for Brokers and Dealers

Trading Positions

The Buy Side and the Sell Side

Investment Bankers

Direct and Indirect Markets

Mutual Funds

Money and Capital Markets

The Eurocurrency Market

The International Bond Market

Globalization of Equity Markets

Dual Listing

Fungibility

Risk

After the Trade: Clearing and Settlement

Dematerialization and the Role of a Depository

Custodial Services

Globalization: The New Mantra

Chapter 2 Mathematics of Finance

Interest Rates

The Real Rate of Interest

The Fisher Equation

Simple Interest

Compound Interest

Properties

A Symbolic Derivation

Principle of Equivalency

Continuous Compounding

Future Value

Present Value

Handling a Series of Cash Flows

The Internal Rate of Return

Evaluating an Investment

Annuities: An Introduction

Perpetuities

The Amortization Method

Amortization with a Balloon Payment

The Equal Principal Repayment Approach

Types of Interest Computation

Loans with a Compensating Balance

Chapter 3 Equity Shares, Preferred Shares, and Stock Market Indexes

Introduction

Par Value versus Book Value

Voting Rights

Statutory versus Cumulative ...

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