Institution Environment of Finance Essay Example | Topics and Well Written Essays - 1000 words

Institution Environment of Finance - Essay ExampleThe channeling of bills amongst the two groups mentioned can single happen accurately in the presence of particular participants and via main routes such as financial intermediaries or through the use of organized financial markets.- Mishkin and Eakins (2006) demonstrate that financial intermediaries can substantially reduce transaction costs that can be defined as the time and money spent in playing financial transactions for instance the exchange of assets, goods or services.One major struggle between deposit-taking institutions (DTIs) and non-deposit-taking institutions (NDTIs) is that deposit-taking institutions are organizations such as banks and building societies, whose liabilities (assets to lenders) are principally deposits. These can be withdrawn at short (sometimes zero) notice and usually form part of the national money supply. Non-deposit-taking institutions are organizations such as breeding assurance companies whose liabilities are promises to pay funds to savers only in response to a specified event. Unless the specified event occurs, it is very difficult to withdraw these funds and there is usually a considerable financial penalty for savers who do so. Similarly, contributions to a pension fund cannot be easily withdrawn until the pension move due for payment.While the difference between Discretionary financial saving and Contractual financial saving is that discretionary is a day-to-day decision to arise financial assets of varying kinds and in varying quantities. While contractual is the regular acquisition of a financial asset of a kind, of an amount and on a date specified in a contract.Question 3How do money markets differ from capital markets Who are the main users of money marketsBasically the difference between the capital markets and money markets is that - Capital markets are for long term investments, - Companies are selling stocks and bonds in order to borrow money from th eir investors to improve their accompany or to purchase assets.Whereas money markets are more of a short term borrowing or lending market where - Banks borrow and lend between each other, as well as finance companies and - Everything that is borrowed is usually paid back within thirteen months.Another difference between the two markets is what is existence used to do the borrowing or lending. In the capital markets the most common thing used is stocks and bonds, whereas with the money markets the most common things used are commercial paper and certificates of deposits.Traditionally, differences of maturity have been used, as in Table, to create a distinction