full file at http://testbankcafe.EU Contents Preface ..................................................................................................................................................... v Alternative Course Outlines ..................................................................................................................... vii Ancillary Items for Financial Markets and Institutions, Seventh Edition ............................................... xi Part I Introduction ............................................................................................................................ Chapter 1 Why Study Financial Markets and Institutions? ................................................. Chapter 2 Overview of the Financial System ...................................................................... 1 2 5 Part II Fundamentals of Financial Markets .................................................................................... Chapter 3 What Do Interest Rates Mean and What Is Their Role in Valuation? ................ Chapter 4 Why Do Interest Rates Change? ......................................................................... Chapter 5 How Do Risk and Term Structure Affect Interest Rates? ................................... Chapter 6 Are Financial Markets Efficient? ........................................................................ 9 10 16 23 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 .................................................................................................................. Chapter 11 The Money Markets ........................................................................................... Chapter 12 The Bond Market ............................................................................................... Chapter 13 The Stock Market ................................................................................................ Chapter 14 The Mortgage Markets ........................................................................................ Chapter 15 The Foreign Exchange Market ........................................................................... Chapter 16 The International Financial System..................................................................... 57 58 63 69 75 86 92 Part VI The Financial Institutions Industry...................................................................................... 97 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 full file at http://testbankcafe.EU iv Contents 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 Mini-Cases.............................................................................................. 157 Solutions to Online Mini-Cases ................................................................................................................ 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 End-ofChapter 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 mini-cases 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 Graduate School of Business Uris Hall 817 Columbia University New York, NY 10027 Stanley G. Eakins Department of Finance—School of Business 3240 Bate Building East Carolina State University Greenville, NC 27858-4343 Frederic S. Mishkin New York, New York Stanley G. Eakins Greenville, North Carolina full file at http://testbankcafe.EU full file at http://testbankcafe.EU 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. Outline for Basic Financial Markets and Institutions Course Core Chapters 1 Why Study Financial Markets and Institutions? 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 one-semester 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 14 The Mortgage Markets 15 The Foreign Exchange Market 16 The International Financial System © 2012 Pearson Education, Inc. Publishing as Prentice Hall viii Alternative Course Outlines 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 one-quarter course would probably only include two or three of the optional chapters. Outline for Financial Markets and Institutions Course with an International Focus Core Chapters 1 Why Study Financial Markets and Institutions? 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 15 The Foreign Exchange Market 16 The International Financial System 17 Banking and the Management of Financial Institutions 18 Financial Regulation 19 Banking Industry: Structure and Competition For a one-semester 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 © 2012 Pearson Education, Inc. Publishing as Prentice Hall Alternative Course Outlines 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 one-quarter course would probably only include one of the optional chapters. Outline for Financial Markets and Institutions Course with a Managerial Emphasis Core Chapters 1 Why Study Financial Markets and Institutions? 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? 17 Banking and the Management of Financial Institutions 19 Banking Industry: Structure and Competition 23 Risk Management in Financial Institutions 24 Hedging with Financial Derivatives For a one-semester 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 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 © 2012 Pearson Education, Inc. Publishing as Prentice Hall ix x Alternative Course Outlines 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 one-quarter course would probably include four or five of the optional chapters. Outline for Financial Markets and Institutions Course with a Public Policy Emphasis Core Chapters 1 Why Study Financial Markets and Institutions? 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 one-semester course, cover any seven of the following optional chapters: 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 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 © 2012 Pearson Education, Inc. Publishing as Prentice Hall Alternative Course Outlines 25 On the Web: Savings Associations and Credit Unions 26 On the Web: Finance Companies A one-quarter course would probably only include four or five of the optional chapters. © 2012 Pearson Education, Inc. Publishing as Prentice Hall xi 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. Overviews of the Chapters and Teaching Tips We have been teaching financial markets and institutions for over ten years. The overviews and teaching tips for each chapter in the next part of the Instructor’s Manual are intended to share some of our experiences with teaching the material in the textbook. Each of these sections lists a brief description of the contents of the chapter, discusses the chapter’s novel features and central points to impart to students, suggests tips for teaching the chapter that we have found useful in our classes, and provides guidance as to what material can easily be skipped in each chapter. Answers and Solutions to End-of-Chapter Questions and Quantitative Problems The Instructor’s Manual also contains the answers to all the end-of-chapter questions and quantitative problems. Please note that for those questions that require students to look up current data, no answers are provided. Some instructors may want to use the end-of-chapter questions and problems in the book for homework assignments. I have found it useful to hand out photocopies of the answers to the questions provided in this section to the students as solution sets after they have completed their assignments; they find them to be an invaluable study aid. The solution sets may also be printed from the Word files on the Instructor’s Resource Center Online. PowerPoints 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 class-tested successfully in our own classes, and we hope that other instructors will find them just as useful a class-preparation tool as we have. Some instructors might use © 2012 Pearson Education, Inc. Publishing as Prentice Hall xii Ancillary Items for Financial Markets and Institutions, Seventh Edition 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, mini-cases, 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 multiple-choice 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. Self-Test consists of fill-in-the-blank, true/false, multiple-choice, short-answer, and problems. Answers to the exercises and self-test are provided for each chapter. © 2012 Pearson Education, Inc. Publishing as Prentice Hall full file at http://testbankcafe.EU
