FIN 072 | Financial Markets

Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Lesson Title: Materials:

Financial Markets (Part 2) Calculator, reviewer notebook,
Lesson Objectives: textbook
At the end of this module, I should be able to:
1. Discuss the different types of financial markets; References:
2. Enumerate the different financial instruments used in the Timbang, F. (2016). Financial
money market; Management Part 2. Quezon City: C
3. Distinguish the primary market from the secondary market; & E Publishing, Inc.
and
4. Describe the function of an investment banker. Brigham, E. F., Houston, J. F., Hsu, J.-
M., Kong, Y. K., & Bany-Ariffin, A.
(2018). Essentials of Financial
Management. Pasig City: Cengage
Learning Asia Pte. Ltd.

Productivity Tip:
Follow a School-Like Schedule
The easiest way to mimic the focus and productivity that you have in school is by working on the same schedule
you would when you are in school. Similarly, to how you spend consecutive periods in different subjects during
the school day, you can set a schedule for yourself that has you spend a certain number of consecutive hours
studying each subject every day.

A. LESSON PREVIEW/REVIEW
1) Introduction (2 mins)
Welcome back! Let us review the lesson on the previous day.
Direction: Complete the illustration.

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 FIN 072 | Financial Markets
Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

2) Activity 1: What I Know Chart, part 1 (3 mins)

What I Know Questions: What I Learned (Activity 4)
What are derivatives?

How can they be used to

reduce or increase risk?

B. MAIN LESSON
1) Activity 2: Content Notes (13 mins)
Basic Functions of the Financial System
1. Promote savings
2. Enable payment
3. Protect against risks
4. Present a means to wealth
5. Provide liquidity
6. Provide credit facilities
Financial Intermediaries
1. Financial intermediaries hire highly qualified people to assess risky investments.
2. Financial intermediaries know how to diversify.
3. Hiring financial intermediaries has a cost advantage or economy of scale.
4. Financial intermediaries reconcile the conflicting interest of the users and lender of funds.
5. Financial intermediaries provide savers with liquidity.
Functions of Investment Banker
1. Originate securities issues through negotiations between the officer of the issuing firm and officers of the
investment bank.
a. Initial discussion
b. Investigation
c. Negotiation
d. Registration
2. Underwrite the issues by guaranteeing their sale in the primary capital market.
3. Manage the distribution of the securities to the ultimate investors. Members of the underwriting syndicate
form a selling group consisting of dealers who will contact the ultimate investors.
4. Give advice to the corporate clients on long-term financial matters.

This document is the property of PHINMA EDUCATION

 FIN 072 | Financial Markets
Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

2) Activity 3: Skill-building Activities (with answer key) (18 mins + 2 mins checking)
Activity 3.1. Discuss the different types of financial markets
Direction: Discuss the diagram. (5 minutes)
Finacial Markets

Money Market Capital Market Others

Certificate of
Elements Types Bond Market
deposits

Organized
Commercial Secondary Commodity
security Primary market
papers market Market
exchanges

Over-the-
Repurchase
counter (OTC) Issuers Aftermarket Stock Market
agreement
Markets

Financial Derivatives
Treasury bills
Instruments Market

Foreign-
Banker's Financial
Exchange
acceptance Intermediaries
Market

Investors

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Activity 3.2. Enumerate the different financial instruments used in the money market
Direction: Explain the different financial instruments used in the money market. (5 minutes)
1. ______________________________ - ______________________________________________________________________________
2. ______________________________ - ______________________________________________________________________________
3. ______________________________ - ______________________________________________________________________________
4. ______________________________ - ______________________________________________________________________________
5. ______________________________ - ______________________________________________________________________________

Activity 3.3. Distinguish the primary market from the secondary market
Direction: Explain the difference between the primary market and secondary market. (5 minutes)

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 FIN 072 | Financial Markets
Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

______________________________________________________________________________________________________________________
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Activity 3.4. Describe the function of an investment banker

Direction: What are the procedures when investing? (5 minutes)
1. ______________________________________________________________________________________________________________
2. ______________________________________________________________________________________________________________
3. ______________________________________________________________________________________________________________
4. ______________________________________________________________________________________________________________
5. ______________________________________________________________________________________________________________

3) Activity 4: What I Know Chart, part 2 (2 mins)

4) Activity 5: Check for Understanding (5 mins)

Write your answers here: Score:
1 6 11
2 7 12
3 8 13
4 9 14
5 10 15

Activity 5.1. True or False. Write TRUE if the statement is correctly stated, otherwise, write FALSE.
1. A share of common stock is not a derivative, but an option to buy the stock is a derivative because the
value of the option is derived from the value of the stock.
2. Financial institutions are more diversified today than they were in the past, when federal laws kept
investment banks, commercial banks, insurance companies, and similar organizations quite separate.
Today the larger financial services corporations offer a variety of services, ranging from checking accounts,
to insurance, to underwriting securities, to stock brokerage.
3. Hedge funds are somewhat like mutual funds. The primary differences are that hedge funds are less highly
regulated, have more flexibility regarding what they can buy, and restrict their investors to wealthy,
sophisticated individuals, and institutions.
4. Trades on the NYSE are generally completed by having a brokerage firm acting as a "dealer" buy securities
and adding them to its inventory or selling from its inventory. The NASDAQ, on the other hand, operates
as an auction market, where buyers offer to buy, and sellers to sell, and the price is negotiated on the
floor of the exchange.

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 FIN 072 | Financial Markets
Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

5. The "over-the-counter" market received its name years ago because brokerage firms would hold
inventories of stocks and then sell them by literally passing them over the counter to the buyer.

Activity 5.2. Conceptual Multiple-Choice Questions. Write the letter of your answer.
6. Which of the following statements is CORRECT?
a. If you purchase 100 shares of Disney stock from your brother-in-law, this is an example of a primary
market transaction.
b. If Disney issues additional shares of common stock through an investment banker, this would be a
secondary market transaction.
c. The NYSE is an example of an over-the-counter market.
d. Only institutions, and not individuals, can engage in derivative market transactions.
e. As they are generally defined, money market transactions involve debt securities with maturities of
less than one year.
7. You recently sold 200 shares of Disney stock, and the transfer was made through a broker. This is an
example of:
a. A money market transaction.
b. A primary market transaction.
c. A secondary market transaction.
d. A futures market transaction.
e. An over-the-counter market transaction.
8. Which of the following statements is CORRECT?
a. Hedge funds are legal in Europe and Asia, but they are not permitted to operate in the United States.
b. Hedge funds are legal in the United States, but they are not permitted to operate in Europe or Asia.
c. Hedge funds have more in common with investment banks than with any other type of financial
institution.
d. Hedge funds have more in common with commercial banks than with any other type of financial
institution.
e. Hedge funds are not as highly regulated as most other types of financial institutions. The justification
for this light regulation is that only "sophisticated investors" (i.e., those with high net worths and high
incomes) are permitted to invest in these funds, and these investors supposedly can do any necessary
"due diligence" on their own rather than have it done by the SEC or some other regulator.
9. Which of the following statements is CORRECT?
a. While the distinctions are becoming blurred, investment banks generally specialize in lending money,
whereas commercial banks generally help companies raise capital from other parties.
b. The NYSE operates as an auction market, whereas NASDAQ is an example of a dealer market.
c. Money market mutual funds usually invest their money in a well-diversified portfolio of liquid
common stocks.
d. Money markets are markets for long-term debt and common stocks.

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 FIN 072 | Financial Markets
Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

e. A liquid security is a security whose value is derived from the price of some other "underlying" asset.
10. Which of the following statements is CORRECT?
a. The New York Stock Exchange is an auction market, and it has a physical location.
b. Home mortgage loans are traded in the money market.
c. If an investor sells shares of stock through a broker, then it would be a primary market transaction.
d. Capital markets deal only with common stocks and other equity securities.
e. While the distinctions are blurring, investment banks generally specialize in lending money, whereas
commercial banks generally help companies raise capital from other parties.

C. LESSON WRAP-UP
1) Activity 6: Thinking about Learning (5 mins)
Work tracker. Congratulations! You have finished the module for today! Shade the number of the module that
you finished.
First Period Second Period Third Period
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

How do you feel today?

I feel (unsatisfactory/satisfactory/excellent) because _______________________________________________________________.

What are your challenges in learning the concepts in this module? If you do not have challenges, what is your
best learning for today?
______________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________

What are the questions/thoughts you want to share to your teacher today?
______________________________________________________________________________________________________________________
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FAQs
1. Economists are concerned about how financial intermediaries can generate shocks to the economy, i.e.,
“bumps” that disrupt the normal flow of economic life. What are the reasons of this concern?
• First, bank debts function as money, so disruptions in banks can affect the amount of money in
circulations. Second, financial intermediaries are tied together through chains of debts and assets.

2. What is meant by stock market efficiency?

• Securities are normally in equilibrium and are “fairly priced.” Investors cannot “beat the market” except
through good luck or better information. Efficiency continuum

This document is the property of PHINMA EDUCATION

 FIN 072 | Financial Markets
Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

KEY TO CORRECTIONS
Review

Activity 1 and 4.
What I Know Questions: What I Learned (Activity 4)

What are derivatives? A derivative security’s value is “derived” from

the price of another security (e.g., options

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 FIN 072 | Financial Markets
Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

and futures).

How can they be used to Can be used to “hedge” or reduce risk. For
reduce or increase risk? example, an importer, whose profit falls when
the peso loses value, could purchase currency
futures that do well when the peso weakens.
Also, speculators can use derivatives to bet
on the direction of future stock prices,
interest rates, exchange rates, and
commodity prices. In many cases, these
transactions produce high returns if you
guess right, but large losses if you guess
wrong. Here, derivatives can increase risk.

Activity 3.
Activity 3.1 – 3.3
Success Criteria
CATEGORY 4 points 3 points 2 points 1 point
Content The paper contains The paper contains The paper contains at The paper contains
Accuracy at least 5 accurate at least 3-4 accurate least 1-2 accurate facts no accurate facts
facts about the facts about the topic. about the topic. about the topic.
topic.
Grammar & Writer makes no Writer makes 1-3 Writer makes 4-6 Writer makes more
Spelling errors in grammar errors in grammar errors in grammar than 6 errors in
(Conventions) or spelling. and/or spelling. and/or spelling. grammar and/or
spelling.
Sentences and Sentences and All Sentences and Most sentences are Many sentence
Paragraphs paragraphs are paragraphs are complete and well- fragments or run
complete, well- complete, well- constructed. sentences or
constructed and of constructed (no Paragraphing needs paragraphing need
varied structure fragments, no run- some work. lot of work.
ons). Paragraph is
generally done well.
Ideas Ideas were Ideas were expressed Ideas were somewhat The paper seemed
expressed in a in a clear manner, organized but were not be a collection of
clear and but the organization noticeably clear. It unrelated sentences.

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 FIN 072 | Financial Markets
Student Activity Sheet Module #2

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

organized fashion. could have been looks more than one It was difficult to
It was easy to better. reading to figure out figure out what the
figure out what the what was the paper paper was about.
paper was about. was about.

Activity 3.4
Investing procedures
1. Choose a stockbroker.
2. Open an account and fill out a customer account information form and submit identification papers for
verifications.
3. Give the order to the trader, and then ask for the confirmation receipt.
4. Pay before the settlement date.
5. The investor shall receive from his/her broker either the proceeds of the sale of his/her stocks (after 3
business days) or proofs of ownership of the stocks he/she bought (confirmation receipt and invoice).

Activity 5.
1. TRUE
2. TRUE
3. TRUE
4. FALSE
5. TRUE
6. E
7. C
8. E
9. B
10. A

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