Dehniece Aleck V.

Mangawang
BS Accountancy

Why is there a need to study Financial Markets and Financial Institutions?

Financial Markets and Financial Institutions is important in our economy as these
two play a crucial part in the creation of commodities and services and the growth of
capital. We have to study the said two topics because it tackles about the grow of our
economy and the investment opportunities. Overall, it has an influence in the financial.
https://www.frbsf.org/education/publications/doctor-econ/2005/january/financial-
markets-economic-performance/
What is the role of money in the economy?
We all know how important money is in our life where we can buy things with money
and fulfill our needs in order for us to survive in our daily living. It is something that we use
every day. Like, we earn it and spend it after with things that we need or want. In economy,
money has three (3) functions.
1. Money is a medium of exchange. It allows us to earn what we need in our life; it
facilitates transactions of money. During past times, bartering exists where in people
exchange goods or services with one another. But now that this world has money
already, it facilitates and streamlines the exchange system.
2. Store of value. It is an asset, commodity, or currency that maintains its value without
depreciating. It can be saved as well without losing its value.
3. Unit of account. It provides common measure of value across the economy. Both the
supplier and the buyer of the product can decide how much of the good to supply
and how much to buy by knowing the value or price of the good in terms of money.
https://www.stlouisfed.org/education/economic-lowdown-podcast-series/episode-9-
functions-of-money
What is about time value of money?
According to Fernando, the idea of the time value of money (TVM) holds that a
quantity of money is worth more now than it will be at a later time because of its potential
for profits in the interim. This is a foundational idea in finance. A sum of money in your
possession is worth more than a similar sum that will be paid in the future. Another name
for the time value of money is present discounted value.
https://www.investopedia.com/terms/t/timevalueofmoney.asp
How are interest rates determined?
Three forces interact to determine them. The Federal Reserve, which determines the
fed funds rate1, has an impact on short-term and variable interest rates.2 The second factor
is the demand from foreign investors for U.S. Bonds and Treasury Notes 3 have an impact on
long-term and fixed interest rates. The financial sector is the third factor. It provides
mortgages and loans, and the interest rates might alter based on the demands of the firm.
https://www.thebalancemoney.com/how-are-interest-rates-determined-3306110