Module 4 Financial Market

MODULE #4 FINANCIAL MARKET
SOUTHERN PHILIPPINES INSTITUTE

OF SCIENCE AND TECHNOLOGY
Tia Maria Bldg., E. Aguinaldo Highway, Anabu 2-A, 4103 Imus, Cavite
Tel. nos. (046) 875-34-58, (046) 471-2930
COURSE/YEAR LEVEL : BSA / 2nd Year

SUBJECT : Financial Market
SEMESTER : 2
MODULE # : 4
INSTRUCTOR : MS. SHERIDANNE P. GILO
PLEASE BE REMINDED!
No part of this module should be reproduced in any form (photocopying, recording and mimeographing) without
permission from the SPIST management.
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SOUTHERN PHILIPPINES INSTITUTE OF SCIENCE & TECHNOLOGY # my second home www.facebook.com/spist official 046-471 29 30 0949 927 15 32
SOUTHERN PHILIPPINES INSTITUTE ● EXPLORE—interactive activities

OF SCIENCE AND TECHNOLOGY ● APPLICATION TASK--- activities, questions requiring analytical, critical, and creative
application of the topic
(this would be in any form)
SUBJECT: FINANCIAL MARKET ⮚ SELF-CHECK/ASSESSMENT—formative & summative assessment; varied forms of assessment that
UNITS: 3 UNITS are aligned to intended learning outcomes (this would be in any form)
HOURS/ WEEK: 3 HOURS PER WEEK
⮚ REFLECTION—“what do you think and feel about the lesson”
COURSE CODE:
⮚ ASSIGNMENT
COURSE DESCRIPTION: This course aims to develop students understanding of the basic principles of ⮚ SUGGESTION’S PAGE/ FEEDBACK
financial markets and provides an introduction to how assets are valued and traded in those markets. It ⮚ GENERAL INSTRUCTIONS:
also considers stock market prices and returns; stock market risk and the influence of risk on the pricing 1.Read first before doing anything.
of shares. This would help the students to assess risks and returns, and the trade-off between the two in 2.USE THE ACTIVITY SHEETS FOR YOUR ANSWERS. ( THIS WOULD BE SUBMITTED TO THE
their future decision-making. INSTRUCTOR)
3.Read the instructions carefully before doing each task.
4.Observe honesty and integrity in doing the tasks /activity.
5.Finish the task at hand before proceeding to the next.
Course Requirements: 1.WRITTEN PERFORMANCE 25% , PERFORMANCE TASK 50%, MAJOR NOTE: DON’T FORGET TO WRITE YOUR NAME AND DATE SUBMITTED IN YOUR ACTIVITY SHEET.
EXAMINATION 25% TOTAL = 100% 2.Prelim, Midterm, Pre-Final, & Final examination IF YOU ENCOUNTER ANY DIFFICULTY IN ANSWERING THE TASKS/ACTIVITY, DO NOT HESITATE TO CONSULT
YOUR INSTRUCTOR. ( MOBILE# 0905 335 3986, GMAIL: sgilo@spist.edu.ph)
REFERENCE/s:
This module is composed of the following elements: CORPORATE FINANCE INSTITUTE., (2015) FINANCIAL MARKET. Retrieved from
⮚ COURSE DESCRIPTION https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/financial-markets/
⮚ COURSE REQUIREMENTS—GRADING SYSTEM BUSINESS JARGONS., (2021).FINANCIAL MARKET. Retrieved from
⮚ REFERENCES/COURSE RESOURCES https://businessjargons.com/financial-market.html
⮚ GENERAL INSTRUCTIONS
⮚ MODULE OVERVIEW: It describes the module. ( “the ALL about”)
⮚ INTENDED LEARNING OUTCOMES: What students should be able to do at the completion of a
INTENDED LEARNING OUTCOMES
module ( based from the syllabus)
⮚ CONTENT: Topics
1. Know and understand the meaning of Financial Institution
⮚ LEARNING SEQUENCE: 2. Recognize the role and importance of Financial Institutions
● ENGAGE/ CONTENT FOCUS---presentation of inputs and knowledge 3. Describe the different types of Financial Institutions
( facts, concepts, theories)—“what to discuss”
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CONTENT
Functions
LEARNING SEQUENCE STARTS HERE!
• The financial institutions provide loans and advances to the customers.
Financial Institutions • The rate of return is very high in case of investment made in this type of institution.
• A financial institution can be defined as an organization that processes financial • It also gives a high rated consultancy to the customers for their beneficial investments.
transactions such as loans, deposits and investments.
• It also serve as a depository for their customers.
• Financial institutions plays the role of intermediaries in the financial market thet • It can also make an effort to minimize the monitoring cost of the company.
facilitates the allocation and deployment of funds.
• All the finance related work is done by the financial institution or on behalf of the
customers
Role and Importance

Types of Financial Institutions
The primary role of financial institutions is to provide liquidity to the economy and permit a
1. Commercial banks- A Commercial bank accepts deposits & provides security in a
higher level of economic activity than would otherwise be possible. Financial institutions are
convenient way to its customers. Previously, a part of the prime purpose of these banks was to
needed to resolve the limitations caused by market imperfections such as limited information
provide security to the customer’s money. Commercial banks also generate loans that
regarding the creditworthiness of borrowers. They provide varied kinds of financial services to
individuals & businesses utilize to purchase goods or even expand business operations. A
the customers, an attractive rate of return and helps in forming the liquidity of the stock in
Commercial Bank is also a type of Financial Institution that often performs roles as a payment
case of an emergency in the financial markets. Also, the institution promotes the direct
agent within a country & between nations.
investment by the customers and making them understand the risk associated with that as
well.
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2. Investment Banks- While an investment bank is also referred to as a normal “bank,” its Features
operations are very different from the deposit-gathering commercial banks. An investment
• It provides a high rate of return to the customers who have invested in the financial
bank is an institution that acts as a financial arbitrator that performs a wide array of services
institution.
for governments and businesses.
• It reduces the cost of financial services provided.
3. Insurance companies- An Insurance company pools risk by gathering premiums from a
large number of people who wish to protect themselves or their loved ones from particular • It is considered very important for the development of financial services in the country.
losses. These losses may include car accidents, fire incidents, disability, lawsuit, illness or
• It also advises the customers on how to deal with the equity and the other securities bought
death. Insurance companies also help individuals & companies to manage risk & preserve
and sold in the market.
wealth.
• It helps to improvise decision-making because it follows a systematic approach to calculate
4. Brokerage Firms- Brokerages act as arbitrators between buyers & sellers. They mainly
all the risks and rewards.
assist in securities transactions. A Brokerage company is compensated via commissions after
successful completion of transactions. For e.g. when the trade order for some stocks is carried
out, a person generally pays a transaction fee. He pays this fee for the efforts the brokerage
Financial Institution vs Banks
company puts in, to implement the trade.
• The functions of payments of various services are done by the bank but the financial
institutions will not be able to do so.
• It cannot accept the demand deposit whereas the banks can accept the demand deposit by
the customers.
• Banks provide the guarantee of repayment of the deposit whereas the financial institutions
may fail to do so.
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• Banks provides services to both public as well as the industry as a whole. While on the other ● It also provides underwriting facilities. amount of the investment made.
hand, financial institutions provide services only to industry.
Advantages Disadvantages ACTIVITY SHEETS
COURSE : ____BSA_________
MODULE # : 4
● The financial institutions help in the ● The process is very complex for some INSTRUCTOR: Ms. Sheridanne P. Gilo
upliftment of the economies of our country. customers because they try to indulge in NAME OF THE STUDENT:___BIÑAS, MIRAFLOR S.____
YEARLEVEL/COURSE: ___2ND YEAR______________
various businesses and end up making DATE SUBMITTED: _________________________
● It has been proved to be more
confusion for themselves.
successful in terms of return earned by the
Activity 1
customers since the rate of return is higher ● In case of default done by the
compared to any other place. management of the financial institutions, the 1. Expound the meaning of Financial Institutions
 A financial institution (FI) is an organization engaging in financial and
customers will have to face major worse
● It is also a smart way to invest money monetary transaction management activities such as savings, lending,
circumstances. The money which they have acquisitions and currency exchanges. The financial institutions provide a
and keep the money rotated in the finance wide variety of financial services industry activities, including banks,
invested may not be recovered. Sometimes
market. trust agencies, insurance companies, brokerage companies and
the principal amount is not assured to be securities dealers. Virtually anyone living in a mature industry also
needs financial institutions' services or at least on a regular basis.
● It provides financial services to the recovered because the government in case of
customers. default announces a certain sum of money
which will be repaid and most of the time the EX
● The repayment facility is also very
amount of government declares to be repaid PL
well managed in financial institutions. O
is very less in comparison to the principal
RE
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Activity 2 Activity 3
2. Based on your understanding, explain the role and importance of Financial Explain the difference between Financial Institution and Banks
Institution  As capital and debt market intermediaries, financial institutions have a
 Banks and credit unions will help to stabilize the economy, allow trade facility. They are responsible for moving funds from customers to
to continue, keep small enterprises afloat and assist people in need of businesses that use them. The existence of financial institutions makes it
missed revenue. Financial institutions not only do the right thing by easier for money to circulate into the economy. This is done by pooling
acting as leaders in a volatile and unpredictable period, but also build a savings accounts to mitigate the risk posed by individual deposit holders
strongere future for themselves and their communities. How banks and in order to have credit funds. That is the main means for developing
credit unions act now has the ability to decide their position in the next income for depository institutions. In this arena, companies provide
decade in local communities. additional fee-generating activities such as shares, sales & trading and
prime dealing, should the rates of return be reversed.
 A bank is a financial services company, including issuing cash on
different forms, collecting deposits, lending and handling transactions,
and generating credit. A trade bank takes consumer deposits and in
exchange lends even exceeding deposits – a mechanism known as the
fractional reserve banking process. Several banks issued banknotes as
legal tender (called issuing banks). For example, most banks often lend
their secure storage boxes in their branches to provide accessory
financial services to increase profitability.
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Activity 4 An insurance provider bundles the burden of

collecting premiums from several customers
In your own words, discuss the different types of Financial Institution who want to cover themselves or their loved
INSURANCE COMPANY ones against specific harm. The casualties can
include automotive crashes, burning, injury,
Type of Financial Institution Discussion
legal proceedings, diseases or deaths.
A commercial bank takes deposits and Insurance firms also assist individuals and
provides consumers with protection companies with risk management and asset
conveniently. Previously, part of these banks' conservation.
primary function was to provide the
customer's money with stability. Trade banks
COMMERCIAL BANK also produce loans that are used by individuals
and companies to buy products or otherwise
increase their business activities. A trade bank Brokerages serve both buyers and sellers as
is often a kind of financial institution often arbitrators. Mainly they help in the
BROKERAGE FIRMS
acting as a payment intermediary within a transaction of shares. After successful
country and between countries. completion of transactions, a courier company
is paid by fee. For example, an individual
While an investment bank is sometimes usually pays a processing fee if a trading order
called a normal bank, its operation is very for certain stocks is executed. He pays this
INVESTMENT BANK distinct from that of commercial banks that charge for the brokerage's work to carry out
collect deposits. An investment bank is a the trade.
financial arbitrator that serves a large range of
public and corporate services. REFLECTION
WHAT DID I LEARN?__________________________________________________________

___________________________________________________________________________
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SUGGESTION’S PAGE
● YOU MAY WRITE YOUR FEEDBACK AND SUGGESTION REGARDING THE MODULE
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Module 4 Financial Market

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MODULE #4 FINANCIAL MARKET

SOUTHERN PHILIPPINES INSTITUTE

COURSE/YEAR LEVEL : BSA / 2nd Year

SOUTHERN PHILIPPINES INSTITUTE ● EXPLORE—interactive activities

Role and Importance

Advantages Disadvantages ACTIVITY SHEETS

Activity 4 An insurance provider bundles the burden of

WHAT DID I LEARN?__________________________________________________________

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