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EU/ SolutionManualforFinancialMarketsandInstitutions7thEditionMishkin,Eakins
Contents
Preface ................................................................................................................................................... v
Alternative Course Outlines.................................................................................................................... vii
Ancillary Items for Financial Markets and Institutions, Seventh Edition............................................... xi
Part I Introduction.......................................................................................................................... 1
Chapter 1 Why Study Financial Markets and Institutions?................................................. 2
Chapter 2 Overview of the Financial System...................................................................... 5
Part II Fundamentals of Financial Markets.................................................................................... 9
Chapter 3 What Do Interest Rates Mean and What Is Their Role in Valuation?................ 10
Chapter 4 Why Do Interest Rates Change?......................................................................... 16
Chapter 5 How Do Risk and Term Structure Affect Interest Rates?................................... 23
Chapter 6 Are Financial Markets Efficient?....................................................................... 29
Part III Fundamentals of Financial Institutions............................................................................... 33
Chapter 7 Why Do Financial Institutions Exist?................................................................. 34
Chapter 8 Why Do Financial Crises Occur and Why Are They
So Damaging to the Economy?.......................................................................... 40
Part IV Central Banking and the Conduct of Monetary Policy...................................................... 45
Chapter 9 Central Banks and the Federal Reserve System.................................................. 46
Chapter 10 Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics..................... 50
Part V Financial Markets................................................................................................................. 57
Chapter 11 The Money Markets........................................................................................... 58
Chapter 12 The Bond Market............................................................................................... 63
Chapter 13 The Stock Market............................................................................................... 69
Chapter 14 The Mortgage Markets....................................................................................... 75
Chapter 15 The Foreign Exchange Market.......................................................................... 86
Chapter 16 The International Financial System.................................................................... 92
Part VI The Financial Institutions Industry..................................................................................... 97
© 2012 Pearson Education, Inc. Publishing as Prentice Hall
iv Contents
Chapter 17 Banking and the Management of Financial Institutions..................................... 98
Chapter 18 Financial Regulation.......................................................................................... 106
Chapter 19 Banking Industry: Structure and Competition.................................................... 114
Chapter 20 The Mutual Fund Industry.................................................................................. 117
Chapter 21 Insurance Companies and Pension Funds.......................................................... 123
Chapter 22 Investment Banks, Security Brokers and Dealers,
and Venture Capital Firms................................................................................. 128
Part VII The Management of Financial Institutions..........................................................................133
Chapter 23 Risk Management in Financial Institutions.........................................................134
Chapter 24 Hedging with Financial Derivatives....................................................................143
Chapters on the Web
Chapter 25 Savings Associations and Credit Unions.............................................................152
Chapter 26 Finance Companies.............................................................................................155
Solutions to Online Integrative MiniCases............................................................................................. 157
Solutions to Online MiniCases............................................................................................................... 163
© 2012 Pearson Education, Inc. Publishing as Prentice Hall
full file at 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, 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 Endof
Chapter 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 minicases on the text’s Companion Website at 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.
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 Stanley G. Eakins
Graduate School of Business Department of Finance—School of Business
Uris Hall 817 3240 Bate Building
Columbia University East Carolina State University
New York, NY 10027 Greenville, NC 278584343
Frederic S. Mishkin Stanley G. Eakins
New York, New York Greenville, North Carolina
© 2012 Pearson Education, Inc. Publishing as Prentice Hall
full file at http://testbankcafe.EU
Alternative Course Outlines
There are many different ways to teach a course on financial markets and institutions. For this reason,
the material in Financial Markets and Institutions has been arranged with flexibility in mind so that many
teaching styles can be 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.
2 Overview of the Financial System
3 What Do Interest Rates Mean and What Is Their Role in Valuation?
4 Why Do Interest Rates Change?
5 How Do Risk and Term Structure Affect Interest Rates?
7 Why Do Financial Institutions Exist?
8 Why Do Financial Crises Occur and Why Are They So Damaging to the Economy?
11 The Money Markets
12 The Bond Market
13 The Stock Market
17 Banking and the Management of Financial Institutions
18 Financial Regulation
19 Banking Industry: Structure and Competition
For a onesemester course, cover any five of the following optional chapters:
9 Central Banks and the Federal Reserve System
10 Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics
© 2012 Pearson Education, Inc. Publishing as Prentice Hall
full file at http://testbankcafe.EU
14 The Mortgage Markets
15 The Foreign Exchange Market
16 The International Financial System
20 The Mutual Fund Industry
21 Insurance Companies and Pension Funds
22 Investment Banks, Security Brokers and Dealers, and Venture Capital Firms
23 Risk Management in Financial Institutions
24 Hedging with Financial Derivatives
25 On the Web: Savings Associations and Credit Unions
26 On the Web: Finance Companies
A onequarter course would probably only include two or three of the optional chapters.
© 2012 Pearson Education, Inc. Publishing as Prentice Hall
Alternative Course Outlines ix
For a onesemester course, cover any three of the following optional chapters:
9 Central Banks and the Federal Reserve System
10 Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics
14 The Mortgage Markets
20 The Mutual Fund Industry
21 Insurance Companies and Pension Funds
22 Investment Banks, Security Brokers and Dealers, and Venture Capital Firms
23 Risk Management in Financial Institutions
24 Hedging with Financial Derivatives
25 On the Web: Savings Associations and Credit Unions
26 On the Web: Finance Companies
A onequarter course would probably only include one of the optional chapters.
For a onesemester course, cover any eight of the following optional chapters:
7 Why Do Financial Institutions Exist?
8 Why Do Financial Crises Occur and Why Are They So Damaging to the Economy?
9 Central Banks and the Federal Reserve System
10 Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics
© 2012 Pearson Education, Inc. Publishing as Prentice Hall
x Alternative Course Outlines
11 The Money Markets
12 The Bond Market
13 The Stock Market
14 The Mortgage Markets
15 The Foreign Exchange Market
16 The International Financial System
18 Financial Regulation
20 The Mutual Fund Industry
21 Insurance Companies and Pension Funds
22 Investment Banks, Security Brokers and Dealers, and Venture Capital Firms
25 On the Web: Savings Associations and Credit Unions
26 On the Web: Finance Companies
A onequarter course would probably include four or five of the optional chapters.
2 Overview of the Financial System
3 What Do Interest Rates Mean and What Is Their Role in Valuation?
4 Why Do Interest Rates Change?
5 How Do Risk and Term Structure Affect Interest Rates?
7 Why Do Financial Institutions Exist?
8 Why Do Financial Crises Occur and Why Are They So Damaging to the Economy?
9 Central Banks and the Federal Reserve System
10 Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics
17 Banking and the Management of Financial Institutions
18 Financial Regulation
For a onesemester course, cover any seven of the following optional chapters:
11 The Money Markets
© 2012 Pearson Education, Inc. Publishing as Prentice Hall
Alternative Course Outlines xi
12 The Bond Market
13 The Stock Market
14 The Mortgage Markets
15 The Foreign Exchange Market
16 The International Financial System
19 Banking Industry: Structure and Competition
20 The Mutual Fund Industry
21 Insurance Companies and Pension Funds
22 Investment Banks, Security Brokers and Dealers, and Venture Capital Firms
23 Risk Management in Financial Institutions
24 Hedging with Financial Derivatives
25 On the Web: Savings Associations and Credit Unions
26 On the Web: Finance Companies
A onequarter course would probably only include four or five of the optional chapters.
© 2012 Pearson Education, Inc. Publishing as Prentice Hall
full file at http://testbankcafe.EU
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.
PowerPoints
© 2012 Pearson Education, Inc. Publishing as Prentice Hall
full file at 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 classtested successfully in our own classes, and we hope that other
instructors will find them just as useful a classpreparation 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.
© 2012 Pearson Education, Inc. Publishing as Prentice Hall
Ancillary Items for Financial Markets and Institutions, Seventh Edition xiii
Companion Website
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,
minicases, animated figures, and links to relevant data sources and Federal Reserve Websites.
Test Bank
The Test Bank, prepared by John Banko of the University of Florida, contains multiplechoice 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.
Study Guide
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:
Chapter Learning Goals
Chapter Summary
Exercises give the students practice with using the concepts in the text by asking them to complete
matching exercises and essay questions.
SelfTest consists of fillintheblank, true/false, multiplechoice, shortanswer, and problems.
Answers to the exercises and selftest are provided for each chapter.
© 2012 Pearson Education, Inc. Publishing as Prentice Hall
full file at http://testbankcafe.EU