• MindTap® Finance digital learning solution enables students to connect with their instructor, organize coursework, and access a range of study tools, including an e-book and apps -- all in one place! MindTap® Reader keeps all their notes together, lets them print material, and will even read text out loud. The MindTap® Mobile App includes pre-populated flashcards, quizzes, and important course alerts, while the Progress App tracks their performance in relation to other students.
• CONNECTION WITH GLOBAL MARKETS. Throughout the text, "Global Aspects" call-outs show your students the interconnectedness of the U.S. and global financial markets.
• HANDS-ON INTERNET/EXCEL EXERCISES DRIVE HOME CHAPTER CONCEPTS. Accompanying Excel® exercises highlight spreadsheet applications related to key topics, such as yield curves, risk premiums, and stock volatility.
• All-new Critical Thinking Questions prompt students to write a short essay on a relevant topic in each chapter, giving them firsthand experience applying chapter concepts to real-world practice.

 

PART 1: Overview of the Financial Environment

1: ROLE OF FINANCIAL MARKETS AND INSTITUTIONS

1-1 Role of Financial Markets

1-2 Securities Traded in Financial Markets

1-3 Role of Financial Institutions

1-4 Credit Crisis for Financial Institutions

 

2: DETERMINATION OF INTEREST RATES

2-1 Loanable Funds Theory

2-2 Factors That Affect Interest Rates

2-3 Forecasting Interest Rates

 

3: STRUCTURE OF INTEREST RATES

3-1 Why Debt Security Yields Vary

3-2 Explaining Actual Yield Differentials

3-3 Estimating the Appropriate Yield

3-4 A Closer Look at the Term Structure

Part 1 Integrative Problem: Interest Rate Forecasts and Investment Decisions

 

PART 2: The Fed and Monetary Policy

4: FUNCTIONS OF THE FED

4-1 Overview

4-2 Organizational Structure of the Fed

4-3 How the Fed Controls the Money Supply

4-4 The Fed’s Intervention during the Credit Crisis

4-5 Global Monetary Policy

 

5: MONETARY POLICY

5-1 Mechanics of Monetary Policy

5-2 Implementing Monetary Policy

5-3 Trade-off in Monetary Policy

5-4 Monitoring the Impact of Monetary Policy

5-5 Global Monetary Policy

Part 2 Integrative Problem: Fed Watching

 

PART 3: Debt Security Markets

6: MONEY MARKETS

6-1 Money Market Securities

6-2 Institutional Use of Money Markets

6-3 Valuation of Money Market Securities

6-4 Globalization of Money Markets

 

7: BOND MARKETS

7-1 Background on Bonds

7-2 Treasury and Federal Agency Bonds

7-3 Municipal Bonds

7-4 Corporate Bonds

7-5 Globalization of Bond and Loan Markets

7-6 Other Types of Long-Term Debt Securities

 

8: BOND VALUATION AND RISK

8-1 Bond Valuation Process

8-2 Explaining Bond Price Movements

8-3 Sensitivity of Bond Prices to Interest Rate Movements

8-4 Bond Investment Strategies

8-5 Valuation and Risk of International Bonds

Appendix 8: Forecasting Bond Prices and Yields

 

9: MORTGAGE MARKETS

9-1 Background on Mortgages

9-2 Types of Residential Mortgages

9-3 Valuation of Mortgages

9-4 Mortgage-Backed Securities

9-5 Credit Crisis

Part 3 Integrative Problem: Asset Allocation

 

PART 4: Equity Markets

10: STOCK OFFERINGS AND INVESTOR MONITORING

10-1 Private Equity

10-2 Public Equity

10-3 Initial Public Offerings

10-4 Stock Offerings and Repurchases

10-5 Stock Exchanges

10-6 Monitoring Publicly Traded Companies

10-7 Market for Corporate Control

10-8 Globalization of Stock Markets

 

11: STOCK VALUATION AND RISK

11-1 Stock Valuation Methods

11-2 Required Rate of Return on Stocks

11-3 Factors That Affect Stock Prices

11-4 Stock Risk

11-5 Risk-Adjusted Stock Performance

11-6 Stock Market Efficiency

11-7 Foreign Stock Valuation and Performance

Appendix 11: The Link between Accounting and Stock Valuation

 

12: MARKET MICROSTRUCTURE AND STRATEGIES

12-1 Stock Market Transactions

12-2 How Stock Transactions Are Executed

12-3 High Frequency Trading

12-4 Regulation of Stock Trading

12-5 Trading International Stocks

Part 4 Integrative Problem: Stock Market Analysis

 

PART 5: Derivative Security Markets

13: FINANCIAL FUTURES MARKETS

13-1 Background on Financial Futures

13-2 Interest Rate Futures Contracts

13-3 Stock Index Futures

13-4 Single Stock Futures

13-5 Risk of Trading Futures Contracts

13-6 Globalization of Futures Markets

 

14: OPTION MARKETS

14-1 Background on Options

14-2 Determinants of Stock Option Premiums

14-3 Speculating with Stock Options

14-4 Hedging with Stock Options

14-5 Options on ETFs and Stock Indexes

14-6 Options on Futures Contracts

14-7 Options as Executive Compensation

14-8 Globalization of Options Markets

Appendix 14: Option Valuation

 

15: SWAP MARKETS

15-1 Background

15-2 Types of Swaps

15-3 Risks of Interest Rate Swaps

15-4 Pricing Interest Rate Swaps

15-5 Performance of Interest Rate Swaps

15-6 Interest Rate Caps, Floors, and Collars

15-7 Credit Default Swaps

15-8 Globalization of Swap Markets

 

16: FOREIGN EXCHANGE DERIVATIVE MARKETS

16-1 Foreign Exchange Markets

16-2 Factors Affecting Exchange Rates

16-3 Forecasting Exchange Rates

16-4 Foreign Exchange Derivatives

16-5 International Arbitrage

Appendix 16: Currency Option Pricing

Part 5 Integrative Problem: Choosing among Derivative Securities

Midterm Self-Exam

 

PART 6: Commercial Banking

17: COMMERCIAL BANK OPERATIONS

17-1 Background on Commercial Banks

17-2 Bank Sources of Funds

17-3 Bank Uses of Funds

17-4 Off-Balance Sheet Activities

17-5 International Banking

 

18: BANK REGULATION

18-1 Regulatory Structure

18-2 Regulation of Bank Operations

18-3 Regulation of Capital

18-4 How Regulators Monitor Banks

18-5 Government Rescue of Failing Banks

18-6 Government Funding during the Crisis

18-7 Financial Reform Act of 2010

18-8 Global Bank Regulations

 

19: BANK MANAGEMENT

19-1 Bank Goals, Strategy, and Governance

19-2 Managing Liquidity

19-3 Managing Interest Rate Risk

19-4 Managing Credit Risk

19-5 Managing Market Risk

19-6 Integrated Bank Management

19-7 Managing Risk of International Operations

 

20: BANK PERFORMANCE

20-1 Valuation of a Commercial Bank

20-2 Assessing Bank Performance

20-3 Evaluation of a Bank’s ROA

Part 6 Integrative Problem: Forecasting Bank Performance

 

PART 7: Nonbank Operations

21: THRIFT OPERATIONS

21-1 Background on Savings Institutions

21-2 Sources and Uses of Funds

21-3 Valuation of a Savings Institution

21-4 Exposure to Risk

21-5 Management of Interest Rate Risk

21-6 Exposure of Savings Institutions to Crises

21-7 Credit Unions

 

22: FINANCE COMPANY OPERATIONS

22-1 Types of Finance Companies

22-2 Sources and Uses of Funds

22-3 Valuation of a Finance Company

22-4 Exposure of Finance Companies to Risk

22-5 Multinational Finance Companies

 

23: MUTUAL FUND OPERATIONS

23-1 Background on Mutual Funds

23-2 Stock and Bond Mutual Funds

23-3 Money Market Funds

23-4 Hedge Funds

23-5 Other Types of Funds

23-6 Valuation and Performance of Mutual Funds

 

24: SECURITIES OPERATIONS

24-1 Functions of Securities Firms

24-2 Regulation of Securities Firms

24-3 Valuation of a Securities Firm

24-4 Exposure of Securities Firms to Risk

24-5 Impact of the Credit Crisis on Securities Firms

 

25: INSURANCE OPERATIONS

25-1 Setting Insurance Premiums

25-2 Regulation of Insurance Companies

25-3 Life Insurance Operations

25-4 Other Types of Insurance Operations

25-5 Exposure of Insurance Companies to Risk

25-6 Valuation of an Insurance Company

 

26: PENSION FUND OPERATIONS

26-1 Types of Pension Plans

26-2 Pension Fund Participation in Financial Markets

26-3 Regulation of Private Pension Plans

26-4 Underfunded Public Defined-Benefit Pension Plans

26-5 Corruption of Defined-Benefit Pension Funds

26-6 Pension Fund Management

26-7 Performance of Pension Funds

Part 7 Integrative Problem: Assessing the Influence of Economic Conditions across a Financial Conglomerate’s Units

Final Review

Appendix A: Comprehensive Project

Appendix B: Using Excel to Conduct Analyses

Glossary

Index

 

Jeff Madura, Florida Atlantic University

Dr Jeff Madura is Emeritus Professor of Finance at Florida Atlantic University. He has written several successful finance texts, including Financial Markets and Institutions (now in its 12th edition). His research on international finance has been published in numerous journals, including Journal of Financial and Quantitative Analysis; Journal of Banking and Finance; Journal of Money, Credit and Banking; Journal of International Money and Finance; Financial Management; Journal of Financial Research; Financial Review; Journal of International Financial Markets, Institutions and Money; Global Finance Journal; International Review of Financial Analysis and Journal of Multinational Financial Management. Dr Madura has received multiple awards for excellence in teaching and research, and he has served as a consultant for international banks, securities firms and other multinational corporations. He served as a director for the Southern Finance Association and the Eastern Finance Association, and he is also former president of the Southern Finance Association.