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This chapter introduces financial markets and instruments. It discusses how financial markets developed to match the needs of those wanting to invest excess money and those wanting to borrow money. Various financial instruments were created, including bonds, which standardize loan terms like amount, interest rate, and maturity. A primary market exists for initial issuance of instruments, while a secondary market allows subsequent trading of instruments between institutions. The interest rates on secondary market trades influence primary market issuance, as new instruments must offer competitive rates or trade at a discount/premium depending on their rates relative to secondary market rates.
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Understanding Financial Markets & Instruments_ Online Book Chapter 1.pdf
This chapter introduces financial markets and instruments. It discusses how financial markets developed to match the needs of those wanting to invest excess money and those wanting to borrow…