Solution_Manual_for_Financial_Markets_an.doc

Full file at http://testbankcafe.EU/ Solution-Manual-for-Financial-Markets-and-Institutions-7th-Edition-Mishkin,-Eakins

Contents Preface Preface ........................... .......................................... .............................. ............................. ............................. .............................. ............................. ........................................ .......................... ......

v

Alternati Alternative ve Course Outlines......... Outlines....................... ............................. .............................. ............................. ............................. ............................. .................................. .................... vii Ancillary Items for Financial Markets and Institutions , Seventh Seventh Editio Edition... n........ .......... .......... .......... ............ ................ ................. ........ Part I

Part II

xi

Introducti Introduction........ on....................... .............................. ............................. ............................. ............................. ............................. ......................................... ..........................

1

Chapte Chapterr 1

Why Study Study Financ Financial ial Market Marketss and Instit Instituti utions ons?.... ?........ ........ ......... .......... .......... .......... .......... ........... ............ ......

2

Chapte Chapterr 2

Overv Overview iew of the Financ Financial ial System System..... .......... .......... .......... .......... .......... ......... ......... .......... .......... .......... .......... .............. ........... ..

5

Fundamenta Fundamentals ls of Financial Financial Markets....... Markets...................... .............................. ............................. ............................. ............................. .................. ....

9

Chapte Chapterr 3

What What Do Do Inter Interest est Rates Rates Mean Mean and and What What Is Is Thei Theirr Role Role in Valuat Valuation ion?................ ?................ 10

Chapte Chapterr 4

Why Do Inte Interes restt Rates Rates Chang Change?.. e?...... ......... .......... .......... .......... ......... ......... .......... .......... .......... .......... .......... .......... ........... ........ .. 16

Chapte Chapterr 5

How How Do Risk Risk and and Term Term Struct Structure ure Affect Affect Intere Interest st Rates?. Rates?...... .......... .......... .......... ......... .......... .......... .... 23

Chapte Chapterr 6

Are Finan Financia ciall Mark Markets ets Effici Efficient ent?.... ?......... .......... .......... .......... .......... .......... .......... ......... ............ ................. .................. ........... .. 29

Part III Fundamenta Fundamentals ls of of Financia Financiall Instituti Institutions... ons................. ............................. .............................. ............................. ............................. .................. ...

33

Chapte Chapterr 7

Why Do Do Financ Financial ial Ins Instit titut ution ionss Exist? Exist?.... ......... .......... .......... ......... ......... .......... .......... .......... .......... .............. ................. ........ 34

Chapte Chapterr 8

Why Do Fina Financi ncial al Cris Crises es Occu Occurr and and Why Why Are Are They They So Damagi Damaging ng to the the Econom Economy?......... y?....................... ............................. ............................. .................................... ...................... 40

Part IV Central Central Banking Banking and the the Conduct Conduct of Moneta Monetary ry Policy Policy.............. ............................. ............................. ......................... ........... 45

Chapte Chapterr 9

Centra Centrall Banks Banks and and the the Fede Federal ral Rese Reserve rve Syst System. em...... ......... ......... .......... .......... .......... .......... .......... .......... ......... ...... 46

Chapte Chapterr 10 Conduc Conductt of Moneta Monetary ry Policy Policy:: Tools, Tools, Goals Goals,, Strateg Strategy, y, and Tact Tactics.. ics.......... ................. ........... .. 50 Part V

Financial Financial Markets........ Markets....................... .............................. ............................. ............................. .............................. ............................. ............................... .................

57

Chapte Chapterr 11 The The Money Money Marke Markets. ts...... ......... ......... .......... .......... .......... .......... .......... .......... ......... ......... .......... .......... .......... .......... .......... .......... ............ ....... 58 Chapte Chapterr 12 The The Bond Bond Market Market.... ......... .......... .......... .......... .......... .......... .......... ......... ......... .......... .......... .......... .......... .......... .......... ......... ......... ............ .........

63

Chapte Chapterr 13 The The Stock Stock Marke Market... t........ .......... .......... .......... .......... .......... .......... ......... ......... .......... .......... .......... .......... .......... .......... ......... ........... .............. ....... 69 Chapte Chapterr 14 The The Mortg Mortgage age Marke Markets. ts..... ........ ......... .......... .......... .......... .......... ......... ......... .......... .......... .......... .......... .......... ........... .............. ............. ..... 75 Chapte Chapterr 15 The The Foreign Foreign Excha Exchang ngee Market.. Market....... .......... .......... .......... .......... ......... ......... .......... .......... .......... .............. ................. .............. ......

86

Chapte Chapterr 16 The The Intern Internati ationa onall Financ Financial ial System System..... .......... .......... .......... ......... ......... .......... .......... .......... .......... .......... .......... .............. ......... 92 Part VI VI The Financi Financial al Institu Institutions tions Industry..... Industry.................... ............................. ............................. .............................. .................................... ..................... 97

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iv iv Contents Contents

Chapte Chapterr 17 Bankin Banking g and the Manage Manageme ment nt of Financi Financial al Instit Institut ution ions.... s......... .......... .......... ........... ............... ............ ... 98 Chapter Chapter 18 Financial Financial Regulatio Regulation........... n.......................... .............................. ............................. ............................. .............................. .................... ..... 106 Chapter Chapter 19 Banking Banking Indust Industry: ry: Struct Structure ure and and Compet Competitio ition............. n............................ ....................................... ........................ 114 Chapter Chapter 20 20 The Mutual Mutual Fund Fund Indus Industry.... try.................. ............................. .............................. ............................. .................................. .................... 117 Chapter Chapter 21 Insurance Insurance Companies Companies and Pension Pension Funds.............. Funds............................. ............................................ ............................. 123 Chapter Chapter 22 Investmen Investmentt Banks, Banks, Security Security Broker Brokerss and Dealer Dealers, s, and Venture Venture Capital Capital Firms............ Firms........................... ............................. ............................. .............................. ......................... .......... 128 Part VII The Managemen Managementt of Financial Institution Institutions............. s............................ ............................. .............................................. ................................ 133

Chapter Chapter 23 Risk Managemen Managementt in Financi Financial al Institu Institution tions............. s........................... ........................................ .......................... ....134 Chapter Chapter 24 Hedging Hedging with with Financia Financiall Derivati Derivatives...... ves..................... .............................. ...............................................143 ................................143 Chapters on the Web

Chapter Chapter 25 Savings Savings Associa Association tionss and Credit Credit Unions. Unions................ .............................. .............................................152 ..............................152 Chapter Chapter 26 Finance Finance Companies Companies.............. ............................ ............................. ............................. .................................................. .................................... 155

Solutions to Online Integrative Mini-Cases.............................................................................................157 Solution Solutionss to Online Online Mini-Cases Mini-Cases.............. ............................ ............................. .............................. ............................. ............................. ....................................... ........................ 163







full file at http://testbankcafe.EU http://testbankcafe.EU

Preface The demands for good teaching at business schools seem to us to have increased dramatically in recent years. In order to aid busy instructors in this demanding environment, environment, we have worked hard to make this Instructor’s Manual a valuable teaching aid that will help reduce class preparation time. The Instructor’s Manual is organized by chapter. Each chapter is broken into sections: Chapter Outline, Overview and Teaching Tips (things we have found useful in the classroom), and Answers to End-ofChapter Questions and Problems. Before the chapter breakdown, and following this preface, are pedagogical suggestions on such topics as how to organize the course and make use of the ancillaries, as well as solutions to the mini-cases on the text’s Companion Website at www.pearsonhighered.com/mishkin_eakins. www.pearsonhighered.com/mishkin_eakins. To obtain access to other instructor resources associated with this textbook, please visit the Instructor’s Resource Center Online at www.pearsonhighered.com/irc. www.pearsonhighered.com/irc. PLEASE NOTE THAT INSTRUCTORS HAVE PERMISSION TO DUPLICATE ANY OF THE MATERIALS IN THIS INSTRUCTOR’S MANUAL FOR CLASSROOM USE. While we believe that this Instructor’s Manual will be an extremely valuable tool in teaching the financial markets and institutions course, we would also appreciate any suggestions or comments for improving this supplement. Please direct all correspondence to us at the addresses below. Frederic S. Mishkin Graduate Sc School of of Bu Business Uris Hall 817 Columbia University New York, NY 10027

Stanley G. Eakins Department of of Fi Finance—School of of Bu Business 3240 Bate Building East Carolina State University Greenville, NC 27 27858-4343

Frederic S. Mishkin New York, New York

Stanley G. Eakins Greenville, North Carolina







iii iii Contents Contents








Alternative Course Outlines

There are many different ways to teach a course on financial markets and institutions. For this reason, Institutions has been arranged with flexibility in mind so that many the material in Financial Markets and Institutions

teaching styles can be accommodated. accommodated. The following section suggests sample outlines for four main approaches to teaching financial markets and institutions that show how the text can be adapted to each approach and to teaching schedules. Note, however, that many variations on these outlines are possible.

Outline for Basic Financial Markets and Institutions Course Core Chapters 1

Why Stud Study y Financ Financial ial Mark Markets ets and and Insti Institut tution ions? s?

2

Over Overvi view ew of of the the Fina Financ ncia iall Syst System em

3

What Do Interes Interestt Rates Rates Mean Mean and and What What Is Their Their Role in Valuat Valuation? ion?

4

Why Why Do Do Int Inter eres estt Rat Rates es Chan Change ge??

5

How Do Do Risk Risk and Term Term Stru Structu cture re Affect Affect Intere Interest st Rates Rates??

7

Why Do Financ Financial ial Instit Instituti utions ons Exist Exist??

8

Why Do Do Financi Financial al Crises Crises Occur Occur and and Why Why Are Are They They So Damaging Damaging to to the Economy? Economy?

11

The Money oney Market rketss

12

The Bo Bond Ma Market

13

The Sto Stock Market rket

17

Banking Banking and and the the Manage Management ment of Financ Financial ial Institut Institutions ions

18

Fina Financ ncia iall Reg Regul ulat atio ion n

19

Bankin Banking g Indust Industry: ry: Stru Structu cture re and Comp Competi etitio tion n







full file at http://testbankcafe.EU http://testbankcafe.EU 14

The The Mo Mortga rtgage ge Mark Market etss

15

The The For Forei eign gn Exch Exchan ange ge Mark Market et

16

The Intern Internati ation onal al Financ Financial ial System System

20

The The Mutu Mutual al Fund Fund Indu Indust stry ry

21

Insura Insurance nce Compan Companies ies and Pensio Pension n Funds Funds

22

Investmen Investmentt Banks, Banks, Security Security Broker Brokerss and Dealers Dealers,, and Ventur Venturee Capital Capital Firms Firms

23

Risk Risk Manage Managemen mentt in Finan Financia ciall Instit Instituti ution onss

24

Hedgin Hedging g with with Financ Financial ial Deriva Derivativ tives es

25

On the Web: Savings Associations and Credit Unions

26

On the Web: Finance Companies

A one-quarter course course would probably probably only include two or or three of the optional optional chapters.

Outline for Financial Markets Markets and Institutions Course with an International Focus Focus Core Chapters 1


2


3


4


5

How Do Do Risk Risk and Term Term Stru Structu cture re Affec Affectt Inter Interest est Rate Rates? s?

7

Why Do Financ Financial ial Instit Instituti utions ons Exist? Exist?

8

Why Do Do Financia Financiall Crises Crises Occur Occur and and Why Why Are Are They They So Damagi Damaging ng to the Econom Economy? y?

11

The Mon Money Mark arkets ets

12


13

The Sto Stock Mark arket

15


16










Alternative Course Outlines Outlines ix ix

For a one-semester course, cover any three of the following optional chapters:

9

Centra Centrall Banks Banks and and the the Fede Federal ral Reserv Reservee Syste System m

10

Conduct Conduct of of Monetary Monetary Policy: Policy: Tools Tools,, Goals, Goals, Strategy Strategy,, and Tactics Tactics

14

The The Mor Mortg tgag agee Mar Marke kets ts

20


21


22

Investmen Investmentt Banks, Banks, Security Security Broker Brokerss and Dealer Dealers, s, and Venture Venture Capital Capital Firms

23


24


25


26


A one-quarter course course would probably probably only include one of the the optional chapters. chapters.

Outline for Financial Markets and Institutions Course with a Managerial Emphasis Core Chapters 1


2


3


4


5

How Do Do Risk Risk and Term Term Stru Structu cture re Affect Affect Intere Interest st Rates Rates??







x Alternative Alternative Course Outlines

11

The Mon Money Mark arkets ets

12


13

The Sto Stock Mark arket

14

The The Mo Mortga rtgage ge Mark Market etss

15


16


18

Fina Financ ncia iall Reg Regul ulat atio ion n

20


21


22

Investmen Investmentt Banks, Banks, Security Security Broker Brokerss and Dealers Dealers,, and Ventur Venturee Capital Capital Firms Firms

25


26


A one-quarter course course would probably probably include four or five five of the optional chapters. chapters.

Outline for Financial Markets Markets and Institutions Course with a Public Policy Emphasis Core Chapters 1


2


3


4








Alternative Course Outlines Outlines xi xi

12


13

The Sto Stock Market rket

14

The The Mor Mortg tgag agee Mar Marke kets ts

15


16


19

Bankin Banking g Indust Industry: ry: Stru Structu cture re and Comp Competi etitio tion n

20

The The Mut Mutua uall Fund Fund Indu Indust stry ry

21


22

Investmen Investmentt Banks, Banks, Security Security Broker Brokerss and Dealer Dealers, s, and Venture Venture Capital Capital Firms

23


24


25


26


A one-quarter course course would probably probably only include four or or five of the optional optional chapters.








Ancillary Items for Financial Markets and Institutions,

Seventh Edition

You may access all ancillary items at the Instructor’s Resource Center Online at www.pearsonhighered.com/mishkin_eakins.

Chapter Outlines The chapter outlines, containing all the headings from each chapter, are a handy reference tool. Instructors may wish to print them out from the Instructor’s Manual files in order to hand them out to students before class, so that students will be able to follow the flow of the lecture. The chapter outlines may also be used to make transparency masters, which can be shown at the beginning of class to outline the lecture and motivate the students.

Overviews of the Chapters and eaching ips We have been teaching financial markets and institutions for over ten years. The overviews and teaching tips for each chapter in the next part of the Instructor’s Manual are intended to share some of our experiences with teaching the material in the textbook. Each of these sections lists a brief description of the contents of the chapter, discusses the chapter’s novel features and central points to impart to students, suggests tips for teaching the chapter that we have found useful in our classes, and provides guidance as to what material can easily be skipped in each chapter.

!nswers and "olutions to End#of#Chapter $uestions







full file at http://testbankcafe.EU http://testbankcafe.EU A set of PowerPoints is available, which contains lecture notes, and the complete set of figures and tables for the textbook. This set of PowerPoints is comprehensive and outlines the major points covered in the text. The lecture notes have been class-tested successfully successfully in our own classes, and we hope that other instructors will find them just as useful a class-preparation tool as we have. Some instructors might use these PowerPoints as their own class notes, but prefer to teach with a blackboard. As with the chapter outlines, these PowerPoints may also be printed for student handouts.









Ancillary Items for Financial Markets and Institutions , Seventh Edition Edition xiii xiii

Companion %ebsite The Companion Website for the textbook, located at www.pearsonhighered.com/mishkin_eakins, features Web chapters on saving associations and credit unions and another on finance companies, Web appendices, mini-cases, animated figures, and links to relevant data sources and Federal Reserve Websites.

est Bank The Test Bank, prepared by John Banko of the University of Florida, contains multiple-choice questions, true/false questions, and short essay questions that are appropriate for use as quiz or test questions. It is available as a set of Microsoft Word or PDF files. All of the questions from the Test Item File are also available in computerized format for use in the TestGen software. The TestGen software is available for both Windows and Macintosh systems.

"tudy &uide The only way to effectively learn about financial markets and institutions is by continual, and active, application of the basic concepts developed in the textbook. To help the student in this endeavor, William Gerken of Auburn University has revised a Study Guide to accompany the Seventh Edition, which contains the following elements for each chapter:








Solution_Manual_for_Financial_Markets_an.doc

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