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European financial market - Essay Example
Pages 7 (1757 words)
The banks are the best examples of financial intermediation. Banks(Levine, 1999) offer their services to accept deposits from their current and new client depositors. The banks also offer to grant loans (Shetty, 1995) to possible client lenders. The banks will grant loans only if the feasibility study( Thompson, 1999) given by the company applying for the bank loan can show proof that it can pay on time the monthly or quarterly or annual installments(Meigs, 1995)…
In business parlance, pooling is the grouping credit transactions like bank loans( Brigham, 1985). An example is when loans and other long term liabilities with the same characteristics are pooled successfully into a new stock. Other examples of pooling applying for cash loans(Weston, 1993) with property, plant and equipment are used as collateral loan received is used to invest in several stocks and bonds. The company can also enter into a bond agreement where the bank intermediaries will give a $200,000 loan where the house and lot and another factory equipment will be pooled together to be used as collateral to put buy stocks in the stock exchange.
Funds includes all available money, including cash and checks deposited in banks and cash on hand. Funds also include mutual funds(Gartner,1997) where money is invested in many stocks and bonds and not lumped on one stock or bond alone.
Pension fund is one fund pooling where the employees contribute a small amount of money to a fund so that when such employee retires, he or she will be able to receive a pension benefit upon his or her retirement. Pension fund could be availed of upon retirement either by lump sum method or monthly method. ...