Chapter Three - Financial Environment

1. Financial Markets - Audio
2. Financial Instititutions
3. Stock Markets - Audio
1. New York Stock Exchange
2. American Stock Exchange
3. NASDAQ
4. Determination of Interest Rates - Audio
1. The observed rate consists of the real rate of return plus inflation (price-expectations).
2. Interest rates reflect the cost of money
3. Interest Rates are influenced by three factors:
• The quantity of money - determined by the Federal Reserve.
• The Income Effect
• Price-Expectations Effect
5. Term Structure of Interest Rates - Current Yield Curve
1. Unbiased Expectations Theory
2. Liquidity Premium Theory
3. Market Segmentation Theory
4. The term structure over the business cycle
6. Interest Rate Levels and Stock Prices
1. Earnings
• Zacks Earnings Estimates
2. Discount Rate
3. Flow Diagram of Stock Price Determination
7. Tax System