Chapter 1. The Financial Environment

Chapter Learning Objectives:


  • Define finance and explain why finance should be studied.

  • Identify and describe the six principles of finance.

  • Identify characteristics and components of an effective financial system.

  • Describe the financial functions performed in an effective financial system.

  • Briefly describe the four types of financial markets.

  • Describe characteristics of the mortgage markets.

  • Discuss the developments that led to the recent financial crisis.

  • Identify several major career opportunities in finance.

Where We Have Been...

As we progress through this book, we will start each chapter with a brief review of previously covered materials. This will provide you with a reference base for understanding the transition from topic to topic. After completing the text, you will be at the beginning of what we hope is a successful business career.

Where We Are Going...

The financial environment within which we live and work is composed of a financial system, institutions, and markets. Part 1 of this text focuses on developing an understanding of the financial institutions and markets that operate to make the financial system work efficiently. Chapter 2 describes the U.S. monetary system, including how it is intertwined with the capital formation process and how it has evolved. Current types of money are described, and we discuss why it is important to control the growth of the money supply. In following chapters, ...

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