Insurance

All business persons have to take some risks, but they try to avoid any which are unnecessary. One way of reducing risks is to take out insurance to cover any losses.

Insurance is an agreement in which an insurance company protects the insured against losses associated with specified risks in return for a fee called the premium payment. Insurance policies are written, legal contracts that spec­ify all of the terms of the agreement, including the types of risks covered, the types of actions by the insured that will void the policy, the maximum amount the insured can collect for losses, and how the premiums are to be paid. In the event of a loss, the insurer will pay for the loss up to the amount specified in the insurance policy.

All insurance policies share several characteristics that distinguish insurance from other risk management techniques. These characteristics include (1) pooling of losses, (2) the law of large numbers, (3) payment of fortuitous losses, (4) risk transfer, and (5) indemnification.

The pooling of losses is one of the central characteristics of insurance. Pooling is the spreading of losses incurred by a few parties over the many parties who have purchased insur­ance. Thus, the party suffering the loss is compensated in full from the fund created from pre­mium payments made by all policyholders.

The law of large numbers states that the larger the number of exposures (policyholders), the more predictable the occurrences of perils on which the insurance premiums are based. Such predictions are called probabilities and are cal­culated using statistical principles. But making such calculations depends on having a large number of insureds, or policyholders. By calculating the expected number and amount of losses, the insurance company can determine the amount of premium payment it must col­lect from the insureds.

Another characteristic of insurance is the payment of fortu­itous losses. A fortuitous loss is a loss that is unforeseen and occurs as a result of chance. This may seem inconsistent with the calculation of expected losses among all policyholders (the law of large numbers), but it is not. Rather, it means only that any individual loss is unfore­seen and results from chance events. This very fact of accidental loss is what makes the law of large numbers work. Thus, if a policyholder intentionally starts a fire in his or her warehouse, the insurer will not cover the loss.

Risk Transfer means that the loss associated with pure risk is transferred to the insurer, who is in a better financial position (due to premium collections) to pay the loss than the insured is. Pure risks that can be transferred to an insurer include risks of premature death, loss of property, liability, and poor health.

A final characteristic of insurance is indemnification for losses. This means the insured is restored to his or her approximate financial status prior to the loss. Thus, if a company's warehouse bums to the ground, the insurer will indemnify the company, or restore it to its previous position. The company will recover sufficient funds from the insurer to rebuild the warehouse.

Many types of insurance are available to protect against a wide variety of perils and risks. The most important types of insurance for business include liability insurance, property insurance, fidelity bonds, surety bonds, criminal insurance, and employee benefit insurance.

Liability insurance protects against claims caused by injuries to others or damage to their property. Unlike other types of insurance, liability insurance pays nothing to the insured when loss occurs. Rather it pays third parties for injuries caused by actions of the insured. Liability insurance includes four types: premises, operations, contingent liability, and product liability insurance.

Premises Insurance, sometimes called owners', landlords', and tenants' insurance, covers the insured when other people trip on the sidewalk, fall into a hole in the lawn, walk into the glass patio door, or fall down the stairs. For example, a grocery store can be sued by a parent whose child fell out of a grocery cart. Premises insurance would cover this peril. Most businesses are required to maintain safe premises. For example, sidewalks must be cleared during a snowstorm, and customers must be alerted to dangerous conditions such as a recently waxed floor.

Operations Insurance. Many everyday business operations create liability exposure for the company. If the business uses forklifts, trucks, or automobiles in its operations, special lia­bilities exist. Both customers and employees may be exposed to hazard from these operations. Employees will likely be covered by public insurance programs, such as workers' compen­sation. However, customers and the general public must be covered by special liability insur­ance. A common example of this type of liability policy is seen in typical automobile insurance policies. These policies cover third parties who are injured by the insured's car and protect the owner from financial loss as a result of those injuries.

Product Liability Insurance. As many manufacturers can tell you, their liabilities do not stop when the product leaves the door. Liability for injuries caused by faulty products may continue throughout the products' useful lives.

Property insurance. Property losses may arise from a variety of perils, such as fire, explosion, lightning, wind, van­dalism, and theft. Property losses can be classified into two groups: direct and indirect losses. Direct losses are those incurred on the property itself. For instance, if a warehouse is damaged by a hailstorm, the costs of repair are direct losses. Indirect property losses involve incidental losses associated with a direct loss. For exam­ple, it may take several days for repair-people to finish repairs on a damaged warehouse. The warehouse cannot be used during this time, and the company may suffer losses in sales rev­enue. Losses of revenue are sometimes called business interruption losses. When an office building is damaged, businesses may have to relocate their operations for a period of time. Costs of moving, setting up, and preparing the new premises are indirect losses.

Text 7

Read the text. Write down 15 statements (both true and false) and let the class identify them and correct the false ones.

Risks

According to The Oxford Dictionary for the Business World, risk is a chance or possibility of danger, loss, injury, etc. What types of risks do you know? What risks do businesses face?

Risk tolerance is the amount of risk with which you are comfortable when selecting your investment options. It is a key factor in building the investment portfolio that is right for you. Often an investor's ability to meet their current financial responsibilities regardless of the results of their investment will influence their tolerance for risk. If you have a high net worth (and can therefore afford to lose some of your invested money), you may feel comfortable speculating in potentially risky investments such as currencies, options, futures and forward contracts. Conversely, if you have a low tolerance for risk (or few dollars to spare) it may be wise to stick to more conservative investments.

Yet, to understand risk as it relates to investments, it is important to have a concrete understanding of what investment risk is. Essentially, investment risk is the chance of loss due to the uncertainty of future events. Many factors can affect the value of your investments. For example, there are risks in political systems that can reduce the value of an investment. A Company you invest in may undergo unforeseen changes in management. Investor emotions may be unpredictable. Uncertainties in exchanges, rates of currencies, and in interest rates also affect investments. Usually, investors deal with risk in two ways: one is to simply guess at it, and the other is to study as many factors as possible and choose the most promising course of action. This latter option is called calculated risk.

Personal risks. This category of risk deals with the personal level of investing. The investor is likely to have more control over this type of risk compared to others. Timing risk is the risk of buying the right security at the wrong time. It also refers to selling the right security at the wrong time. For example, there is the chance that a few days after you sell a stock it will go up several dollars in value. There is no surefire way to time the market. Tenure risk is the risk of losing money while holding onto a security. During the period of holding, markets may go down, inflation may worsen, or a company may go bankrupt.

Company risks. There are two common risks on the company-wide level. The first, financial risk, is the danger that a corporation will not be able to repay its debts. This has a great effect on its bonds, which finance the company's assets. The more assets are financed by debts (i.e., bonds and money market instruments), the greater the risk. Studying financial risk involves looking at a company's management, its leadership style, and its credit history. Management risk is the risk that a company's management may run the company so poorly that it is unable to grow in value or pay dividends to its shareholders. This greatly affects the value of its stock and the attractiveness of all the securities it issues to investors.

Fluctuation in the market as a whole may be caused by the following risks. Market risk is the chance that the entire market will decline, thus affecting the prices and values of securities. Market risk, in turn, is influenced by outside factors such as embargoes and interest rate changes. Liquidity risk is the risk that an investment, when converted to cash, will experience loss in its value. Interest rate risk is the risk that interest rates will rise, resulting in a current investment's loss of value. A bondholder, for example, may hold a bond earning 6% interest and then see rates on that type of bond climb to 7%. Inflation risk is the danger that the dollars one invests will buy less in the future because prices of consumer goods rise. When the rate of inflation rises, investments have less purchasing power. This is especially true with investments that earn fixed rates of return. As long as they are held at constant rates, they are threatened by inflation. Inflation risk is tied to interest rate risk, because interest rates often rise to compensate for inflation. Exchange rate risk is the chance that a nation's currency will lose value when exchanged for foreign currencies. Reinvestment risk is the danger that reinvested money will fetch returns lower than those earned before reinvestment

Language

1. Practise reading the following words correctly. If necessary, use a dictionary.

Finance, financial, asset, equity, issue, mortgage, inventories, scarce, liability, securities, obligations, quotation, incur, merger, indemnification, fortuitous, occurrence, unsurer, authorized, cyclical, resume, peril, hazard, purchase, liquidity.

2. Give the definition to the following terms.

Finance, financial market, quotation, exchange rate, asset, liability, financial transaction, stock, option, financial liability, equity, securities, vote, dividend, shareholder, Stock Exchange, capitalization, calculated risk, purchasing power.

3. Reproduce the context the following words are used in

Financial services; scarce loanable funds; financial sector; financial transactions; financial assets and liabilities (text 1); corporation issues stock; capitalization; common stock; preferred stock; preemptive rights; one vote for each share owned (text 2); cash distribution; dividend policy; stock dividend; property dividend; increase earnings for common shareholders (text 3); channel savings; primary market; secondary market; OTC market (text 4); currency option; call option contract; forex market transactions; spot rate; forward transaction (text 5); an insurance police; the insurer; cover the loss; product liability insurance (text 6); calculated risk; to time the market; to deal with risk (text 7).

4. Give the Russian equivalents to the following

to stock the shelves; relative to the demand for the resources; a claim against the income; accumulated retained earnings; financial markets; preferred stock; debt securities; initially issued securities; financial records of transaction; securities are traded; equity liability; to repay the principal; accidental losses; indemnification; fortuitous loss ; financial services; interest rate; available for lending; borrow for consumption; the cost of credit; total spending; assets held by individuals; party of the transaction, bid-ask format; outstanding shares; confers voting and preemptive rights; to cast the votes; allow the stock split; undergo unforeseen changes; surefire way; due to uncertainty; rewards for the assumption of risks.

5. Complete the following table

Noun Verb Adjective

indemnification --- ---

--- collect ---

trade --- ---

--- initiate ---

cost --- ---

--- spend ---

quality --- ---

--- work ---

--- govern ---

--- --- commercial

--- economize ---

system --- ---

--- allocate ---

--- loose ---

--- --- quantitative

option ----- ---

--- risk ---

6. Give the English equivalents to the following

проводить операции с ценными бумагами; определять процентную ставку; подвергать риску; сделать фонды доступными; в условиях неопределенности; участвовать в оценке активов компании; относительно спроса на ресурсы; финансовая система; акции; рыночная стоимость акции; привилегированная акция; одна акция – один голос; доля активов; различаться по своим правам; облигации; защитить от потерь; ценные бумаги; материально-технические ценности; сделка; процентная ставка; финансовые активы; получать дивиденды сверх номинала; фондовая биржа; выкупить акции у акционеров; получить дополнительный дивиденд; увеличить доходы владельцев простых акций; простой дивиденд; цена колеблется; страховой полис; страхователь; страховой взнос; страховщик; $20 за акцию; принять на себя финансовые обязательства.

7. Think of the situations where you could use the following idiomatic expressions. Give their Russian equivalents.

Keep a cool head; keep a low profile; keep and eagle eye on smb; keep balls in the air; keep clear of smb; keep one’s chin up; keep one’s cool; keep one’s ear to the ground; keep one’s feet on the ground; keep one’s finger crossed; keep one’s head above water; keep one’s head down; keep one’s powder dry; keep one’s word; keep smb in the air; keep smb at arm’s length

8. Insert the necessary prepositions.

1.The main task is to find out what is ... the core of the problem. 2.The financial markets are composed ... the money market and the capital market. 3.It applies ... any group of markets. 4.You can do whatever you want but ... your own risk. 5.He specializes ... dealing ... bonds. 6.It accounts ... 80 percent of all their shares. 7.What bank are you going to borrow money … ? 8.I’m not sure he has the right … these securities. 9.This money is enough to pay …the service. 10.It accounts … 50 percent … all their securities. 11.We aren’t planning to enter … an agreement … this bank. 12.What is the exchange rate the spot transaction takes place …? 13.These rates are quoted … European terms. 14.It’s not the same! They vary largely … rights. 15.The shareholders have the right … higher dividends. 16.We have the right to vote … all the matters of the company. 17.They tried to hold the inflation … constant rate but failed. 18.They assured us to exercise it … 30 days. 19.You can buy them … person, … mail, … the phone, or … the Internet. 20.They are to compensate … all your losses.

9. Rephrase the words in italics.

1.The financial system is an integral part of the economic system. 2.The financial system provides the means whereby modern economies grow and increase the standard of living of the citizens. 3.For every real transaction there is a financial transaction that mirrors it. 4.All trade involves both the real sector and the financial sector. 5.The financial sector is important for the real sector. 6.They are composed of the money markets and the capital markets. 7.They deal with buying and selling the securities of the company. 8.The term money market applies to a group of loosely connected markets. 9.Currency option contracts confer on the buyer a right, but not an obligation. 10.The benefits from acquisition are called senergies. 11.Our analysis focuses on the total value of the firm. 12. Stock prices can be found in newspapers, on TV and in the Internet. 13. A proxy authorizes the proxy holder to vote. 14.They are ready to pay cash to obtain the stock of another company. 15.Pieces of their profits are an incentives to hold stocks.

10. Match the halves.

1. Your decision to invest in education in

2. Investment generally refers to

3. The financial markets make possible

4. There is no guarantee that

5. Investment risk can be measured by

6. The more assets are financed by debts

7. When the rate of inflation rises,

8. Investors continually seek investments that provide

9. The pooling of interests is one of

10. The party suffering the losses

11. The volatility is the amount that

1. the expected flow of future income will ever materialize.

2. the price fluctuates above and below the previous price.

3. investments have less purchasing power.

4. the volatility of investment.

5. the exchange of current income for future income.

6. a decision to invest in human capital.

7. the greatest net after-tax returns.

8. the acquisition of capital goods.

9. the greater the risk.

10. the characteristics of insurance.

11. is compensated in full from the fund.

11. Make up the sentences putting the words in the correct order. The first word is given in bold.

1. Business, equity, either, money, can, through, or can, debt.

2. Raising, mean, lenders, on, money, becoming, can, dependent, very.

3. The, simply, nothing, in, greatest, is, risk, of, risk, doing, risk, business.

4. If, risk, finger, you, have, much, of, current, chance, then, tips, relevant, your, reliable, you, better, and, information, managing, have, a, at.

5. Raising, on, business, your, and, depends, people, in, economy, the, having, money, the, on, concept, of, business, on, right, the, your.

12. Explain the difference in the meaning of the following synonyms. Use them in your own sentences.

1. Income, revenue, return, yield, earnings, proceeds, receipts, gains

2. risk, hazard, peril, jeorpady

13. Read the words given below. What meaning do the prefixes under- and over- add to a word?

Undervalue, undermine, overeating, overestimate, overcook

Add the prefixes to the following words, translate them into Russian, use the words in your own sentences or situations.

Under- to load, to man, to pay, production, to take, capacity, to rate, to quote, world, to charge;

Over - abundance, to act, to come, to colour, to crowd, to do, draft, due, to feed, to hear, to lap, time, to ma, stock, statement, tax.

14. Rewrite the sentences, using the Passive Voice.

1.Most economies require enormous amounts of investment in capital goods. 2.Households invest when they buy a new house. 3.Many factors can affect the value of your investment. 4.Economists have developed a mathematical tool to “measure” these fluctuations. 5.The Greek letter beta represents this measurement. 6.An insurance company protects the insured against losses. 7.If a policyholder intentionally starts a fire, the insurer will cover the loss. 8.The company will recover sufficient funds from the insurer to rebuild the warehouse. 9.They are discussing their investment policy for the next year. 10.He showed me his scheme of new stock issuing.

15. Open the brackets.

A market order (to give) your broker the signal (to buy) or (to sell) a particular security at the current market price. A market order ( to guarantee) execution, but it (not to guarantee) a specific price. You can (to give) your broker additional instructions. Limit order (to allow) you (to instruct) your broker (to buy) or (to sell) a stock at a specific price or better. You (to use) a limit order when the stock you (to be interested) in (to change) in price. This (to prevent) the broker from (to buy) too high, or (to sell) too low. A limit order ( to guarantee) a price but not the execution.

Stop loss order (to let) you (to instruct) your broker to sell a stock if it (to fall) below a specified price (to prevent) further loss. You (to use) a stop loss order if you (to be concerned) that a stock you own (to fall) in price. A stop loss order (to use) (to protect) unrealized profits or prevent further losses on a position. One type of orders (to be) good-till-cancelled (GTC) or day order. When you (to place) a limit, stop or stop-limit order, you (to ask) if you (to want) it (to be) “good until it is cancelled” or “good for the day”. This (to allow) you (to choose) the length of time the order (to remain) open for execution at the marketplace

Look through the text once again. What is the text about? Put down the financial terms used in the text. Explain their meaning.

16. Translate into English using the Passive Voice.

1.Операции с этими ценными бумагами были проведены по телефону и через компьютерную сеть 2 дня назад. 2.Как правило, дивиденды выплачиваются наличными. 3.Этот капитал может быть использован для производства товаров и услуг. 4. Боюсь, эти данные не будут проверены к концу рабочего дня. 5. Все пошлины оплачены, и бумаги можно отправлять заказчику. 6. Деньги переведены на их счет два дня тому назад. 7.Оценка деятельности компании дается акционерами на ежегодном собрании. 8.Не все риски можно просчитать. 9.Сотни факторов подлежат тщательному рассмотрению и обсуждению, прежде чем решение будет принято. 10.Капиталы инвестируются только в те проекты, которые могут принести прибыль. 11. Все заработанные деньги были вложены в этот перспективный проект. 12. Все имущество будет застраховано в течение первой недели после покупки.

17. Read the words given below. Be sure you know the meaning of each word. Insert them in the blanks. Mind your grammar.

combination, agency, market, value, term, quotation, government, level, interaction, activity, amount, cost, income, compensation, inflation, redistribution, productivity, rate, output, stock, factor, purchasing, percentage, price, outcome, force, index, currency.

Inflation rates, interest rates, and exchange rates represent fundamental ... in the economy that influence the ... of business and financial decisions, and hence the direction of economic activities. The phenomenon of continuously increasing ... is called inflation. The inflation rate is the ... change in the general price level over a specified period of time. Inflation reduces the ... power of money and other assets denominated in monetary units. Changes in inflation are tracked by a measure known as a price ... .

Inflation is caused by changes in a number of economic ... . These factors include the money ..., the level of ..., interest ..., labor ..., and the exchange rate. The far-reaching effects of inflation include ... of income and wealth, influence on a country's international trade and financial ..., and general uncertainty and loss of confidence. Governments usually try to control ... by manipulating their money stocks.

The ... paid for lending money is called interest. The interest rate is the percentage of the loan ... paid as compensation. Interest is a source of ... to the lender and a ... to the borrower. In a free-market system, interest rates are determined by the ... of demand and supply forces. The ... of interest rates is affected by changes in economic factors such as the money stock, output, the inflation rate, and exchange rates. ... try to control inter­est rate changes primarily by manipulating the money stock.

An exchange rate is the price of one ... expressed in terms of another cur­rency. Exchange rates are commonly quoted either in European or American … . In European terms of ..., the value of a U.S. dollar is expressed in terms of all other currencies. In American terms of quotation, the ... of all other currencies are expressed in terms of U.S. dollars. Historically, exchange rates have been determined either by the ... forces of demand and supply (the floating-rate system), by official government ... (the fixed-rate system), or by a ... of the two (the system of managed float).

Exchange rates, interest rates, and inflation rates are interrelated. Changes in one can ... the others to change.

Look through the passage once again. What economic phenomena are described in it? Define and explain each of them.

18. Work in pairs. Expanding the following statements, explain each other the functions of the financial system.

Functions of the Financial System

Savings Function -- providing a potentially profitable and relatively low-risk outlet for the public's savings.

Liquidity Function -- providing a means of raising funds by converting securities and other financial assets into cash balances.

Payments Function -- providing a mechanism for making payments to purchase goods and services.

Policy Function -- providing a channel for government policy to achieve society's goals of high employment, low inflation, and sustainable economic growth.

Wealth Function-- providing a means to store purchasing power until needed at a future date for spending on goods and services.

Credit Function -- providing a continuing supply of credit for businesses, consumers, and governments to support both consumption and invest­ment spending in the economy.

Risk Function -- providing a means to protect businesses, consumers, and governments against risks to people, property, and income.

***If you find it difficult to do the task, read the whole text in Appendix F.

19. Read the following passage attentively. Find the implanted words.

Takeover is a general and imprecise cold term referring to the transfer of control of a tiny firm from one group of yellow shareholders to another. A firm that has decided to take over anoth­er firm is usually as a rule referred to as the bidder. The bidder offers to pay pet cash or securities to obtain the stock or assets of another company. If the offer is gratefully accepted, the target firm will give up control over its stock or assets to the bidder in exchange for the consider­ation (i.e., its stock, its debt, or cash). For example, when a bidding firm acquires towards a target firm, the right to control the operating activities of the target firm is transferred to a newly elected board of marketing direc­tors of the acquiring firm. This is a compromising takeover by acquisition.

Takeovers can occur by acquisition, proxy suspicious contests, and going-private transac­tions. Thus, takeovers encompass a broader set of activities than small-sized acquisitions. In mergers and tender offers, the acquiring firm buys the voting common stock of the acquired firm. Takeovers can recently occur with proxy contests. Proxy contests occur when a group of shareholders attempts to gain controlling seats on the board of directors by voting against in new directors. A proxy authorizes the proxy keep holder to vote on all matters in a share­holders' meeting. In a proxy contest, proxies from the rest of the shareholders are solicited by an insurgent subdivided group of shareholders. In going-private transactions, all the equity shares of a public firm are purchased by buying a small group of investors. The group usually includes no members of incumbent man­agement and some thousand outside investors. The shares of the unique firm are delisted from stock according to exchanges and can no longer be purchased in selling the open market.

Look through the text once again. What is it about? Summarize it in 3-5 sentences.

20. Translate from Russian into English. Use your active vocabulary.

1.В более выгодном положении оказываются те, у кого больше акций. 2.Акционеры могут отдать все свои голоса за одного кандидата или распределить их на нескольких. 3.Они имеют право обратиться в суд по поводу несанкционированных действий руководства компании. 4.Эта процедура должна быть исполнена в течение 30 дней. 5.Если корпорация, выпускающая акции, обанкротилась и вынуждена продавать свои активы, простые акционеры получают свою долю в последнюю очередь. 6.Инвесторы могут продавать свои акции другим инвесторам через брокеров.7.Первичный и вторичный рынок составляют фондовый рынок. 8.Они стремятся реинвестировать прибыль ради будущего роста компании. 9.Этот метод выгоден для тех, кто владеет большим количеством акций. 10.Сумма дивиденда зависит от того, насколько хорошо работает фирма.

21. Using your active vocabulary, render the following passage in English (100-120 words).

Структура международных валютно-кредитных и финансовых отношений включает многочисленные международные организации. Одни из них осуществляют регулирование международных валютно-кредитных и финансовых отношений, другие представляют собой форум для межправительственного обсуждения, выработки консенсуса и рекомендаций по валютной и кредитно-финансовой политике, третьи -- обеспечивают сбор информации, статистические и научно-исследовательские издания по актуальным валютно-кредитным и финансовым проблемам и экономике в целом. Некоторые выполняют все перечисленные функции.

Международные валютно-кредитные и финансовые организации условно можно назвать международными финансовыми институтами. Эти организации объединяет общая цель — развитие сотрудничества и обеспечение целостности и стабилизации сложного и противоречивого всемирного хозяйства. К организациям, имеющим всемирное значение, относятся прежде всего специализированные институты ООН, такие как МВФ и группа Всемирного банка, Всемирная торговая организация. На Конференциях ООН по торговле и развитию — ЮНКТАД обсуждаются валютно-кредитные вопросы, проблемы мировой торговли и др. В период между сессиями функции ЮНКТАД выполняет Совет по торговле и развитию. Проблемы мировой валютной системы обсуждаются в Комитете по «невиди­мым» статьям и финансированию. Специализированное учреждение ООН — Экономический со­вет — создал 4 региональные комиссии — для Европы, Африки, Азии, Латинской Америки.

В 1961 г. была создана Организация экономического сотрудничества и развития (ОЭСР, Париж). Ныне в составе ОЭСР 30 стран. В рамках ОЭСР действуют 30 комитетов. Цель ОЭСР — содействие экономическому развитию и фи­нансовой стабилизации стран-членов, свободной торговле, раз­витию молодых государств. ОЭСР — своеобразный клуб развитых стран для обмена мнениями и координации экономичес­кой политики. ОЭСР ведет научно-исследовательскую работу, является центром прогнозиро­вания и международных сопоставлений на базе эконометрических моделей мировой экономики.

Парижский клуб стран-кредиторов — неформальная организа­ция развитых государств, где обсуждаются проблемы урегулиро­вания, отсрочки платежей по государственному долгу стран. Начало его деятельности относится к 1956 г., когда кредиторы Аргентины были приглашены в Париж на переговоры с должниками. На заседаниях Парижского клуба присутствуют наблюдатели из МВФ, МБРР, ЮНКТАД и обычно рассматрива­ется вопрос о той части внешнего долга, которая должна быть погашена в текущем году.

Лондонский клуб обсуждает проблемы урегулирования част­ной внешней задолженности стран-должников.

Speaking

1. Why is it important to understand how the financial system operates? In what ways is the financial system linked to the economy as a whole?

2. What are the principal functions of the financial system? How do the financial markets fulfill those functions?

3. Explain the role of the financial markets in the economic system.

4.What is a financial asset? How does it arise within the workings of the financial system?

5. Distinguish between the spot and forward markets for foreign exchange. Why is it necessary to have two markets rather than one?

6. What Stock Exchanges have become most dominant? Why?

7. What is the Law of Large Numbers? What is its relationship to the insurance business?

8. Use the information of the Unit and Appendix F to prepare a report (3-5 minutes) on one of the following topics: a) Role of the Financial Markets; b) Mergers and Acquisitions; c) Common and Preferred Shareholders

9. Explain in your own words the benefits of shares for a) investors and b) companies.

10. Give your comments on the following: “Know your risks, or risk your future.”

Writing

1. “There is no more dramatic or controversial activity in corporate finance than the acquisition of one firm by another or the merger of two firms. “ Why? Explain your point of view in 200-250 words.

2. Write a 200 word essay on the following topic: “The policy of being too cautious is the greatest risk of all” (J. Nehru)

Key Vocabulary

finance (n,v) common stock channel savings

financial system principal preeemtive rights

assets obligations financial transaction

liabilities primary market stockbroker

outstanding secondary market exchange rate

equity preferred stock capital market

stocks proxy equity securities

securities forward transactions voting rights

bonds spot transactions issue securities

option quotation foreign exchange (forex) market

dealer forward rate spot transaction

auction calls OTC (over-the-counter)

NASDAQ quote pooling of losses

acquisition indemnification risk transfer

insurer insured policyholder

premium financial claims insurance

merger swap money market

timing risk cumulative capitalization

U N I T VII

W O M E N I N B U S I N E S S