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The Federal Reserve - Essay Example

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Finance and accounting Name: Professor: Institution: Course: Date: Abstract Companies need to have a sense of financial security in order to be able to continue in business. Financial securities provide companies an opportunity to participate in the financial market thus enhancing the growth and development of the general economy…
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The Federal Reserve

Download file to see previous pages... This paper seeks to analyze the role of the financial markets in economic wealth creation in the United States as well as three financial securities which include; stock shares, bonds, and treasury bills. Analyze the role financial markets play in creating economic wealth in the U.S. Financial markets have a significant role as far as the United States economy is concerned. Most importantly they aid in the creation of wealth through various ways. In line with this a major role of financial markets is the facilitation of transfer of funds from those who have surplus to those without. This basically means that funds are channeled to borrowers from lenders through systems and frameworks in the financial markets. Lenders spend small portions of their incomes while the rest is kept for savings while borrowers wish to spend more than their incomes. This makes it possible for funds to flow from the lenders to the borrowers. Financial markets provide an avenue through which finances move from lenders to borrowers. In financial markets financial instruments otherwise regarded as financial securities are instruments that facilitate the transfer of funds. Borrowers purchase the financial securities from lenders which acts a claim on future assets and incomes of the former. Therefore financial markets enable companies to obtain funds in a much easier for development and growth or rather for the exploitation of a new business idea. This processes therefore translates to the creation of wealth in the United States since private businesses, the government as well big companies can be able to engage in Investment activities as a result of readily available funds through the financial markets securities. Provide a general overview of each of the three (3) securities you chose. Be sure to include such information as name, company it represents (if applicable), pricing, and historical performance. Walmart Company makes use of financial securities to source funds and be able to continue in business. Stock shares are financial securities that facilitate operations of this company in the financial markets in the United States. Stock shares enable investors to actually invest their funds in this company. Walmart company shares have in the past presented an investment image that is not that attractive to investors (Groz, 2009). Over the past decade the company traded its shares in the stock exchange market in New York with the price per share being $58.75. At the time the earnings yield per share was 2.54% which meant that investors received an earning per share of $1.49. Such a rate of return on Walmart’s shares was actually lees by a half of what an investor could have received if they invested in treasury bonds. In this case the United States treasury bonds had a much better deal for investors. The returns on shares did not account for payment of taxes after the distribution of dividends to the shareholders. Besides the use of treasury bonds, the United States government issues treasury bills in order to be able to source funds to support its investments as well as other activities. Treasury bills securities are short term instruments whose maturity is usually on a quarterly, half year or annual basis (Valdez, 2002) The United States t ...Download file to see next pagesRead More
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