Part I , THE FINANCIAL SYSTEM
Chapter 1 An Overview of Financial Markets and Institutions
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Learning Objectives
1.1 The Financial System
1.2 Financial Markets and Direct Financing
Do You Understand?
PEOPLE & EVENTS: Wall Street Faces Global Competition
1.3 Types of Financial Markets
1.4 The Money Markets
1.5 The Capital Markets
Do You Understand?
1.6 Financial Intermediaries and Indirect Financing
Do You Understand?
1.7 Types of Financial Intermediaries
Do You Understand?
1.8 The Risks Financial Institutions Manage
1.9 Regulation of the Financial System
Do You Understand?
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Chapter 2 The Federal Reserve and Its Powers
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2.1 Origins of The Federal Reserve System
PEOPLE & EVENTS: Free Banking and Wildcat Banks
2.2 The Current Structure of The Fed
2.3 Monetary Powers of the Board of Governors
2.4 The Fed's Regulatory Powers
2.5 Independence of The Fed
Do You Understand?
2.6 The Fed's Balance Sheet
Learning by Doing 2.1: Computing a Bank's Excess Reserve Position
2.7 The Fed's Role In Check Clearing
2.8 Federal Reserve Tools of Monetary Policy
PEOPLE & EVENTS: A Contrast In Style: Greenspan versus Bernanke
Learning by Doing 2.2: Calculating a Bank's Reserve Position
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Chapter 3 The Fed and Interest Rates
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3.1 Federal Reserve Control of The Money Supply
3.2 The Fed's Influence on Interest Rates
3.3 The Treasury Department and Fiscal Policy
Do You Understand?
3.4 Goals of Monetary Policy
PEOPLE & EVENTS: The Fed as Lender of Last Resort: Preventing a Financial Panic
3.5 The Fed and the Economy
PEOPLE & EVENTS: Black Monday
3.6 Complications of Monetary Policy
3.7 Anatomy of a Financial Crisis
Do You Understand?
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Part II, How Interest Rates Are Determined
Chapter 4 The Level of Interest Rates
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4.1 What Are Interest Rates?
4.2 The Real Rate of Interest
4.3 Loanable Funds Theory of Interest
Do You Understand?
4.4 Price Expectations and Interest Rates
PEOPLE & EVENTS: Irving Fisher (1867-1947): Economist
Do You Understand?
PEOPLE & EVENTS: Estimating the Expected Rate of Inflation from TIPS
4.5 Forecasting Interest Rates
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Chapter 5 Bond Prices and Interest Rate Risk
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5.1 The Time Value of Money
Do You Understand?
5.2 Bond Pricing
PEOPLE & EVENTS: Rogue Trader Incurs Huge Financial Losses for French Bank
Learning by Doing 5.1: Calculating the Price of a Bond Using a Financial Calculator
5.3 Bond Yields
Learning by Doing 5.2: Calculating the Yield to Maturity on a Bond
Do You Understand?
5.4 Important Bond Pricing Relationships
5.5 Interest Rate Risk and Duration
Learning by Doing 5.3: Calculating the Duration of a Bond
PEOPLE & EVENTS: Betting the Farm on Interest Rates and Losing
Do You Understand?
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Chapter 6 The Structure of Interest Rates
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6.1 The Term Structure of Interest Rates
Learning by Doing 6.1: Using the Term Structure Formula to Calculate Implied Forward Rates
Do You Understand?
6.2 Default Risk
PEOPLE & EVENTS: The Credit-Rating Club
6.3 Tax Treatment
Do You Understand?
6.4 Marketability
6.5 Options of Debt Securities
Do You Understand?
6.6 Behavior of Interest Rates over the Business Cycle
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Part III, Financial Markets

Chapter 7 Money Markets
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7.1 How the Money Markets Work
7.2 Economic Role of the Money Markets
7.3 Characteristics of Money Market Instruments
7.4 Treasury Bills
Learning by Doing 7.1: Calculating the Discount Yield
Learning by Doing 7.2: Calculating the Bond Equivalent Yield
Do You Understand?
7.5 Federal Agency Securities
7.6 Fed Funds
7.7 Other Major Money Market Instruments
PEOPLE & EVENTS: Lehman Brothers "Creative" Accounting: Repos 105 and 108
7.8 Money Market Participants
7.9 The Impact of the 2007-2009 Financial Crisis on the Money Markets
PEOPLE & EVENTS: How Breaking the Buck (Almost) Broke the Commercial Paper Market
Do You Understand?
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Chapter 8 Bond Markets
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8.1 Functions of the Capital Markets
8.2 U.S. Government and Agency Securities
PEOPLE & EVENTS: What Do Negative Yields on TIPS Tell Us?
Do You Understand?
8.3 State and Local Government Bonds
8.4 Corporate Bonds
Do You Understand?
8.5 Financial Guarantees
8.6 Securitized Credit Instruments
8.7 Financial Market Regulators
8.8 Bond Markets Around the World Are Increasingly Linked
8.9 The Impact of the 2007-2009 Financial Crisis on the Bond Markets
Do You Understand?
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Chapter 9 Mortgage Markets
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9.1 The Unique Nature of Mortgage Markets
9.2 Types of Mortgages
Do You Understand?
9.3 Mortgage Qualifying
Do You Understand?
9.4 Mortgage-backed Securities
Learning by Doing 9.1: Determining How Much Home You Can Buy
9.5 Mortgage Prepayment Risk
Do You Understand?
9.6 Participants in the Mortgage Markets
PEOPLE & EVENTS: The Rise and Fall of Fannie and Freddie
9.7 Relationship between Mortgage Markets and the Capital Markets
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Chapter 10 Equity Markets
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10.1 What Are Equity Securities?
10.2 Equity Markets
10.3 Equity Trading
10.4 Global Stock Markets
10.5 Regulation of Equity Markets
Do You Understand?
10.6 Equity Valuation Basics
Do You Understand?
Learning by Doing 10.1: Valuing a Stock
10.7 Equity Risk
Do You Understand?
10.8 Stock Market Indexes
PEOPLE & EVENTS: Circuit Breakers, Black Monday, and the Flash Crash
10.9 The Stock Market as a Predictor of Economic Activity
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Chapter 11 Derivatives Markets
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Learning Objectives
11.1 The Nature of Derivative Securities
11.2 Forward Markets
11.3 Futures Markets
11.4 Uses of the Financial Futures Markets
Learning by Doing 11.1: Hedging Risk in a Stock Portfolio
11.5 Risks in the Futures Markets
Do You Understand?
11.6 Options Markets
Do You Understand?
11.7 Regulations of the Futures and Options Markets
11.8 Swap Markets
PEOPLE & EVENTS: Swap Market Regulation
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Chapter 12 International Markets
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12.1 Difficulties of International Trade
12.2 Exchange Rates
12.3 Balance of Payments
12.4 Foreign Exchange Markets
12.5 Spot and Forward Transactions
Learning by Doing 12.1: Using Forward Contracts to Hedge Exchange Rate Risks
PEOPLE & EVENTS: The Big Mac Test of Purchasing Power Parity
12.6 Capital Flows and Exchange Rates
Do You Understand?
12.7 Government Intervention in Foreign Exchange Markets
Learning by Doing 12.2: Using Purchasing Power Parity to Determine the Expected Exchange Rate
12.8 Financing International Trade
Do You Understand?
12.9 International Money and Capital Markets
12.10 The Globalization of Financial Markets
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Part IV, Commercial Banking

Chapter 13 Commercial Bank Operations
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Learning Objectives
13.1 An Overview of the Banking Industry
13.2 Balance Sheet for a Commercial Bank
13.3 The Source of Bank Funds
Do You Understand?
13.4 Bank Uses of Funds: Bank Investments and Cash Assets
13.5 Bank Uses of Funds: Loans and Leases
13.6 Loan Pricing
13.7 Analysis of Loan Credit Risk
PEOPLE & EVENTS: What's Your Score?
Do You Understand?
13.8 Fee-Based Services
13.9 Off-Balance-Sheet Banking
Do You Understand?
13.10 Bank Earnings
13.11 Bank Performance
Do You Understand?
13.12 Bank and Financial Holding Companies
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Chapter 14 International Banking
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14.1 Development of International Banking
14.2 Regulation of Overseas Banking Activities
14.3 Delivery of Overseas Banking Services
PEOPLE & EVENTS: Credit Risk, Subprime Mortgage Crisis of 2007, and Challenges to the Banking Sector
Do You Understand?
14.4 International Lending
Do You Understand?
14.5 Foreign Banks in the United States
14.6 Future Directions of International Banking
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Chapter 15 Regulation of Financial Institutions
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Learning Objectives
15.1 Reasons for Regulation
15.2 Bank Failures and Regulation
PEOPLE & EVENTS: WaMu and the Destructive "Power of Yes"
15.3 Safety and Soundness Regulation: Deposit Insurance
Do You Understand?
15.4 Deposit Insurance Issues
Do You Understand?
15.5 Safety and Soundness Regulation: Capital Requirements
Do You Understand?
15.6 Bank Examinations
15.7 Structure and Competition Regulations
15.8 Consumer Protection Regulations
PEOPLE & EVENTS: Dual or Dueling Banking Systems?
15.9 Bank Regulators
Do You Understand?
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Part V, Financial Institutions

Chapter 16 Thrift Institutions and Finance Companies
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16.1 Historical Development of Savings Institutions
16.2 Operations of Savings Institutions
Do You Understand?
16.3 Credit Unions
PEOPLE & EVENTS: Demographic Change Brings Opportunity
PEOPLE & EVENTS: Commercial Banks Versus Credit Unions
16.4 Thrift Institutions Around the Globe
Do You Understand?
16.5 Finance Companies
Do You Understand?
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Chapter 17 Insurance Companies and Pension Funds
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17.1 Insurance
PEOPLE & EVENTS: 9/11 and Katrina: Insurance Coverage Disputes
17.2 The Insurance Industry
Do You Understand?
17.3 Life and Health Insurance
Do You Understand?
17.4 Property and Liability Insurance
Learning by Doing 17.1: Calculating Policyholders' Surplus
Do You Understand?
17.5 Pensions
Learning by Doing 17.2: Measuring Insurance Company Profitability with the Combined Ratio
Do You Understand?
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Chapter 18 Investment Banking
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Learning Objectives
18.1 The Relationship between Commercial and Investment Banking
18.2 Primary Services of an Investment Bank
PEOPLE & EVENTS: Where, Oh, Where Have All the Investment Banks Gone?
Do You Understand?
18.3 Private Equity
Learning by Doing 18.1: Evaluating a Venture Capital Investment
Do You Understand?
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Chapter 19 Investment Companies
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Learning Objectives
19.1 Investment Companies
19.2 Open-end Mutual Funds
Learning by Doing 19.1: Calculating Net Asset Value
PEOPLE & EVENTS: Money Market Mutual Funds Breaking the Buck
19.3 Closed-end Mutual Funds
19.4 Exchange-traded Funds
Do You Understand?
19.5 Hedge Funds
PEOPLE & EVENTS: Hedge Funds and the Dodd-Frank Wall Street Reform and Consumer Protection Act
Do You Understand?
19.6 Real Estate Investment Trusts
Do You Understand?
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Chapter 20 Risk Management in Financial Institutions
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20.1 The Dilemma: Profitability versus Safety
20.2 Liquidity Management
Do You Understand?
PEOPLE & EVENTS: Operational Risk
20.3 Managing Credit Risk
Do You Understand?
PEOPLE & EVENTS: Counterparty Controversy: AIG and Its Risky Risk Management
20.4 Measuring and Assessing Interest Rate Risk
20.5 Hedging Interest Rate Risk
Do You Understand?
Learning by Doing 20.1: Measuring Interest Rate Risk
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