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The optimal time to trade the forex foreign exchange market is when it's at its most active levels. That's when trading spreads the differences between bid prices and ask prices tend to narrow. In those situations, less money goes to the market makers facilitating currency trades, which leaves more money for the traders to pocket personally. Forex traders need to commit their hours to memory, with particular attention paid to the hours when two exchanges overlap. When more than one exchange is open at the same time, this increases trading volume and adds volatility—the extent and rate at which forex market schedule or currency prices change. The volatility can benefit forex traders. This may seem paradoxical.

Investing and financial markets quizlet website cent forex advisors

Investing and financial markets quizlet website

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Together, the money market and the capital market comprise a large portion of what is known as the financial market. The money market is a good place for individuals, banks, other companies, and governments to park cash for a short period of time, usually one year or less.

It exists so that businesses and governments that need cash to operate can get it quickly at a reasonable cost, and so that businesses that have more cash than they need can put it to use. The returns are modest but the risks are low. The instruments used in the money markets include deposits , collateral loans, acceptances, and bills of exchange. Institutions operating in the money markets include the Federal Reserve, commercial banks, and acceptance houses.

When a company or government issues short-term debt, it's usually to cover routine operating expenses or supply working capital, not for capital improvements or large-scale projects. The money market plays a key role in ensuring that banks, other companies, and governments maintain the appropriate level of liquidity on a daily basis, without falling short and needing a more expensive loan and without hoarding excess cash that isn't earning interest.

Individual investors may use the money markets to invest their savings in a safe and accessible place. Many choices are available, including mutual funds that focus on state money market funds, municipal funds, and U. Treasury funds. Many of the government funds are tax-free. A money-market fund also can be opened at most banks. The capital market is where stocks and bonds are traded. Its movements from hour to hour are constantly monitored and analyzed for clues as to the health of the economy at large, the status of every industry in it, and the consensus for the short-term future.

The overriding goal of the companies institutions that enter into the capital markets is to raise money for their long-term purposes, which usually come down to expanding their businesses and increasing their revenues. They do this by issuing stock shares and by selling corporate bonds.

The capital market is roughly divided into a primary market and a secondary market. A company that issues a round of stock or a new bond places it in the primary market for sale directly to investors or institutions. If and when those buyers decide to sell their shares or bonds, they do so on the secondary market.

The original issuer of those stocks or bonds does not immediately benefit from their resale, although companies certainly have an interest in the price of their stock shares rising over time. The capital market is by nature riskier than the money market and has greater potential gains and losses. Money Market Account. Fixed Income. Your Money. Personal Finance.

Your Practice. Popular Courses. Investing Investing Essentials. Foreign investment is generally seen as a catalyst for economic growth and can be undertaken by institutions, corporations, and individuals. Investors interested in foreign investment generally take one of two paths: foreign portfolio investment or foreign direct investment. Foreign portfolio investment FPI refers to the purchase of securities and other financial assets by investors from another country.

Examples of foreign portfolio investments include stocks, bonds, mutual funds, exchange traded funds, American depositary receipts ADRs , and global depositary receipts GDRs. Foreign direct investment FDI refers to investments made by an individual or firm in one country in a business located in another country. Investors can make foreign direct investments in a number of ways. Some common ones include establishing a subsidiary in another country, acquiring or merging with an existing foreign company, or starting a joint venture partnership with a foreign company.

Foreign portfolio investment FPI refers to investing in the financial assets of a foreign country, such as stocks or bonds available on an exchange. This type of investment is at times viewed less favorably than direct investment because portfolio investments can be sold off quickly and are at times seen as short-term attempts to make money, rather than a long-term investment in the economy.

Portfolio investments typically have a shorter time frame for investment return than direct investments. As with any equity investment, foreign portfolio investors usually expect to quickly realize a profit on their investments. As securities are easily traded, the liquidity of portfolio investments makes them much easier to sell than direct investments. Portfolio investments are more accessible for the average investor than direct investments because they require much less investment capital and research.

Unlike direct investment, portfolio investment does not offer the investor control over the business entity in which the investment is made. Foreign direct investment FDI involves establishing a direct business interest in a foreign country, such as buying or establishing a manufacturing business, building warehouses, or buying buildings.

Foreign direct investment tends to involve establishing more of a substantial, long-term interest in the economy of a foreign country. Foreign direct investment tends to be viewed more favorably since they are considered long-term investments, as well as investments in the well-being of the country itself. At the same time, the nature of direct investment, such as creating or acquiring a manufacturing facility, makes it much more difficult to liquidate or pull out of the investment.

For this reason, direct investment is usually undertaken with essentially the same attitude as establishing a business in one's own country—with the intention of making the business profitable and continuing its operation indefinitely.

For the investor, direct investment means having control over the business invested in and being able to manage it directly. It also involves more risk, work, and commitment compared to foreign portfolio investment. When making foreign investments, investors have to consider economic factors as well as other risk factors, such as political instability and currency exchange risk.

One of the riskier forms of foreign direct investment is called green-field investing. Multinational corporations will use green-field investing to create a new subsidiary in a foreign country, frequently in an emerging market. The term green-field is used because the parent company builds the subsidiary from the ground up similar to a farmer preparing a field for planting.

A downside to green-field investing is the enormous amount of money the parent company may need to spend to get the subsidiary operating. This may include the purchase of land, the building of production facilities, and the training of a local labor force. Other barriers to entry may include meeting local restrictions on foreign businesses, paying required taxes and permit fees, and requirements for the use of domestically manufactured components. Financial Analysis. International Markets.

Types of Corporations. Your Money.

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Study with Quizlet and memorize flashcards terms like Which best describes the role that government and business play in investments?, Which are common. Start studying Investing and Financial Markets. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Start studying Investing & Financial Markets. Learn vocabulary, terms, and more with flashcards, games, and other study tools.