The financial system is often considered as the backbone of a country’s economy, hence economic growth of the nation is extremely dependent on the fundamental structure of its financial system. Global economy was booming when the sub prime crisis took place in US in early…
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With passage of time things turned more complex; bankruptcy of big financial institutions like Merrill Lynch, Morgan Stanley and Bank of America disturbed the sentiment of the market. Such state of affairs affected the global stock markets and soon almost all the developed nations were engulfed by economic recession (p.63-67)
To support the economy, the government of different nations infused stimulus packages for injecting liquidity in the market. Government also provided bails to several corporate companies to save them from bankruptcy. The increasing financial crisis was aggravated by a decline in demand; hence government had to enhance spending so as to raise the demand. To raise the demand and boost confidence among the investors, government reduced tax rate on several direct as well as indirect tax instruments so that the investors can have more money in their hand. To boost expenditure among the investors and to enhance supply of cash in the market, government reduced prime lending rate as low as possible.
From the above given fact it appears that government of almost all the developed nations are following expansionary monitory and fiscal policy. Through expansionary monitory policy governments were able to reduce the rate of interest to a great extent. Through open market operations the central bank enhanced total money circulating in the economy whereas the government enhanced the monitory supply through sovereign bond transactions. The governments of developed nation enhanced disbursement of cash through banking sector by reducing cash reserve ratio i.e. the cash which the banks need to maintain as deposit with central bank. Reserve banks gave loans to the financial instructions at lower rate so that they can disburse loans to the investors and supply of money increases. Interest rate is the most commonly used monitory tool to
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(Development in Banking and Finance Essay Example | Topics and Well Written Essays - 4500 Words)
“Development in Banking and Finance Essay Example | Topics and Well Written Essays - 4500 Words”, n.d. https://studentshare.org/miscellaneous/1563819-development-in-banking-and-finance.
During this period, the investors get a fixed percentage of interest on their investment. The period and the percentage of interest changes according to the nature and kind of bond. Bonds provide fixed income to the investors and it is a safer investment choice, therefore, bonds are called fixed income bearing securities.
The main products that the above firms deal in are pensions, savings, mortgages, loans, insurance and investment options and credit card services (Morley, 1992). It is therefore not surprising that some of the biggest earners in the world are financial institutions, making the sector one of the most lucrative and competitive one in the world economy (Acharya & Richardson, 2009).
Virgin money is the owner and operator of the bank. It is located at Regent Centre of United Kingdom. It is the earliest bank which suffered a bank run once it approached the Bank of England for a facility of loan. The bank was taken into ownership of the public in 2008 after failing to find purchaser for the business.
Thus, for the determination of the value of a bond for a period of time, the rate of interest is a useful metric that would help in determination of the present value and the future value of the bond. Interest rate is generally determined from the market rates which would be captured in the valuation of a long term debt instrument such as a bond.
Through the Islamic financial system there is a facilitation of services such as lending, borrowing and investing on a risk-sharing basis. The Islamic financial system can be called a value-based mechanism and the main target is to ensure “moral and material wellbeing” of the persons as well as the whole community.
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veloped economies as part of normal re-establishment of equilibrium, Japan has found it hard to recover from such a decline for many reasons, including bad debt burdens and the daunting task of restructuring its economy. This inability to reverse the decline in price levels, in