SHS

Business Finance
Week 2 – Module 3
Business Finance
Grade 12 Week 2 – Module 3
First Edition, 2020

Copyright © 2020
La Union Schools Division
Region I

All rights reserved. No part of this module may be reproduced in any form without
written permission from the copyright owners.

Development Team of the Module

Author: Geneisis P. Villanueva, T I

Editor: SDO La Union, Learning Resource Quality Assurance Team
Illustrator: Ernesto F. Ramos Jr., P II

Management Team:

ATTY. Donato D. Balderas, Jr.

Schools Division Superintendent
Vivian Luz S. Pagatpatan, Ph.D
Assistant Schools Division Superintendent
German E. Flora, Ph.D, CID Chief
Virgilio C. Boado, Ph.D, EPS in Charge of LRMS
Erlinda M. Dela Peña, Ed.D, EPS in Charge of Mathematics
Michael Jason D. Morales, PDO II
Claire P. Toluyen, Librarian II
Business Finance
Week 2 – Module 3
 Target

Financial institutions financial market and financial instrument is a part

of every business. Let’s take it to the simplest explanation. In a company they were
able to produce products and after producing their product buyers such as super
markets etc. will now get the products to be sold at a wholesale or retail price to the
consumers. Some will pay through checks and some will pay it in cash. The
company represents Financial institution, super marts are what we called financial
market and the mode of payment such as check and cash are what we called
financial instrument.

In your past lesson you have learned about financial system financial
managers and its different roles. This concept will lead you to the idea of financial
institutions financial instrument and financial market.

This module will provide you information and activities that will lead
you to understand more about financial institution, financial instrument and
financial market.

After going through this module, you are expected to:

1. define financial institution, financial instrument and financial market

2. distinguish a financial institution from financial instrument and
financial market

Before going on, check how much you know about this topic. Answer the
pretest on the next page in a separate sheet of paper.

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 PRE-TEST

Direction: Read the questions carefully then encircle the correct answer.

1. What do you call the monetary contract between parties?

A. Financial Instrument C. Financial Market
B. Financial Institution D. Financial Forecast

2. Which of the following is a financial Institution?

A. Savings Account C. Stock Market
B. Cash D. Land Bank of the
Philippines

3. What do you call the place where the trading of securities occurs?
A. Financial Instrument C. Financial Market
B. Financial Institution D. Financial Forecast

4. Which of the following is an example of financial market?

A. Savings Account C. Stock Market
B. Cash D. Land Bank of the
Philippines

5. Which of the following best describes financial Instruments?

A. These are place to trade stocks and bonds.
B. It is something that has a value.
C. These are things that provide financial services.
D. It is a contract and things given to each party that has a
monetary value.

6. . Which of the following is financial institution?

A. Bank Check C. Stocks
B. Brokerage Firms D. Bond Market

7. . Which of the following is financial institution?

A. Bank Check C. Stocks
B. Brokerage Firms D. Bond Market

8. Which of the following greatly affects financial Market?

A. Capital B. Economy C. Market D. Technology

9. At what level does money markets involved large volume trades between
institutions and traders?
A. Retail level C. Critical level
B. Wholesale level D. None of the above

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 10. Which of the following is an example of brokerage firms?
A. Lending companies C. Mutual fund
B. Small and Medium Enterprises D. Savings Banks

Jumpstart

For you to understand the lesson well, read and understand what you are
reading then do the following activities. Have fun and good luck!

Activity 1: Read Me! Understand ME!

Direction: Read the text about finance below. Understand what you are reading.

Financial instrument is the written legal obligation of one party to transfer

something of value-usually money to another party at some future date under
certain condition such as stocks, loans, or insurance. It is a monetary contract
between parties. Financial instrument serves as a means of payment (like money)
store of value (like money) allow for the trading of risk.
Examples: bank loans, future contracts
bonds, stocks,
mortgages insurance

Financial Markets offer liquidity to borrowers and savers. Refer broadly to

any market place where the trading of securities occurs, including the stock market,
bond market, forex market and derivative market.

Types of Financial Market

a. Over-the-counter Market- doesn’t have physical location and trading
is conducted electronically
b. Bond Market -Sells securities such as notes and bills
c. Money Market – trade in products with highly liquid short-term
maturities and high degree of safety and a relatively low return in
interest
d. Derivatives Market- trades in future and option contracts and other
advanced financial products that derive their value from
underlying instruments

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 Financial Institution is a company engaged in business of dealing with
financial and monetary transactions such as deposits loans, investments and
currency exchange. Financial institution encompasses a broad range of business
operations with in the financial services sector including banks, trust companies,
brokerage firms and investment dealers. Financial institution can vary by size
scope and geography.
Examples: Commercial and Investment bank
Insurance companies
Brokerage firms

Direction: Read carefully and answer the following questions. Encircle the letter
your answer.

1. What do you call the monetary contract between parties?

A. Financial Instrument C. Financial Market
B. Financial Institution D. Financial Forecast

2. What do you call the place where the trading of securities occurs?
A. Financial Instrument C. Financial Market
B. Financial Institution D. Financial Forecast

3. Which of the following is an example of financial instrument?

A. Bank C. Stocks
B. Brokerage Firms D. Stock Market

4. Which of the following is financial institution?

A. Bank Check C. Stocks
B. Brokerage Firms D. Bond Market

5. Which of the following is financial institution?

A. Bank Check C. Stocks
B. Brokerage Firms D. Bond Market

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.

Discover

FINANCIAL INSTITUTION, FINANCIAL INSTRUMENT and FINANCIAL MARKET

What is Financial Instrument?

Financial instrument are assets that can be traded, or they can also be seen
as packages of capital that may be traded. Most types of financial instrument
provide efficient flow and transfer of capital all throughout the world’s investors.
These assets can be cash, a contractual right to deliver or receive cash or another
type of financial instrument, or evidence of one’s ownership of an entity.
Financial instrument can be divided into two types cash instrument and
derivative instrument.
a.) Cash Instrument
The values of cash instruments are directly influenced and
determined by the markets. Cash instrument may also be deposits and
loans agreed upon by borrowers and lenders.
b.) Derivative Instrument
The value and characteristics of derivative instruments are based on
the vehicles underlying components such as assets, interest rates or
indices.
An equity option contract, for example, is a derivative because it
derives its value from the underlying stock.

What is Financial Institution?

Financial institution is a company engaged in the business of dealing with

financial and monetary transaction such as deposits, loans, investments and
currency exchange. Financial institution encompasses a broad range of business
operations within the financial service sector including banks, trust companies,
insurance companies, brokerage firms and investment dealers.

Types of Financial Institutions

a.) Commercial Bank- is a type of financial institution that accepts
deposits, offer checking account services, makes business,
personal, and mortgage loans, and offer basics basic financial
products like certificate of deposits and savings account to
individuals and small businesses. A commercial bank is where
people do their banking, as opposed to an investment bank.
b.) Investment Banks – Investment Bank specialized in providing
services designed to facilitate business operations, such as capital

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 expenditure financing and equity offerings, including initial public
offerings (IPOs).
c.) Insurance Companies- Among the most familiar non-bank financial
institutions are insurance companies. Providing insurance,
whether for individuals or corporations.
d.) Brokerage Firms- Investment companies and brokerages, such as
mutual fund and exchange traded fund (ETF) provide investment
services that include wealth management and financial advisory
services.

What is Financial Market?

Financial market refers broadly to any market place where the trading of
securities occurs, including the stock market, bond market, forex market and
derivatives market among others. Financial market is vital to the smooth operation
of capitalist economies.

Types of Financial Markets

a.) Over-the-counter Market- it is a decentralized market-meaning it
does not have physical locations, and trading is conducted
electronically- in which market participants trade securities
directly between two parties without a broker.
b.) Bond Markets- A bond is a security in which an investor loans
money for a defined period at a pre-established interest rate. The
bond market sells securities such as notes and bills.
c.) Money Market- typically the money markets trade in products with
highly liquid short-term maturities (of less he one year) and are
characterized by high degree of safety and a relatively low return
in interest. At the wholesale level, the money markets involved
large volume trades between institutions and traders. At the retail
level, they include money market mutual funds bought by
individual investors and money market accounts opened by bank
customers.

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 Explore

Here are some enrichment activities for you to work on to master and
strengthen the basic concepts you have learned from this lesson.

Enrichment Activity 1: CLASSIFY ME!

DIRECTION: Classify the words below as financial instruments financial

institutions or financial market. Write your answers on the shapes assigned
to each classification.

Commercial Bank Cash Mortgages

Stocks Brokerage Firms Bond Market
Bonds Insurance Companies
Investment Bank Over-the-counter Market
Money Market insurance

FINANCIAL INSTRUMENT
FINANCIAL INSTITUTION

FINANCIAL MARKET

Great job! You have understood the lesson. Are

you now ready to summarize?

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 Deepen

You have learned about the financial instrument financial institutions

and financial market now let’s try to distinguish the similarities and
differences of the three using Venn Diagram.

What you need

Clean sheet of Pad Paper or bond paper and a pen

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 RUBRICS FOR VENN DIAGRAM

5 3 1
SIMILARITIES Student correctly Student Student
identified two identified one identified none of
similarities similarity the similarities
between financial between
instruments financial
markets and instruments
institutions markets and
institutions

DIFFERENCES Student correctly Student Student

identified two identified one identified none of
differences difference the differences
between financial between
instruments financial
markets and instruments
institutions markets and
institutions
ORGANIZATION Student correctly Student is not Student did not
organized the organized but use the Venn
content of the correctly diagram correctly
over lapping written on the
circles circles

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 Gauge

Directions: Read carefully each item. Use separate sheet for your answers.
Write only the letter of the best answer for each test item.
1. What do you call the monetary contract between parties?
A. Financial Instrument C. Financial Management
B. Financial Institution D. Financial Market

2. What type of financial institution accepts deposits?

A. Commercial Bank C. Insurance Companies
B. Investment Bank D. Brokerage Firms

3. What term refers broadly to any market place where the trading of
securities occurs?
A. Financial Instrument C. Financial Management
B. Financial Institution D. Financial Market

4. What type of financial market does not have physical locations, and trading
is conducted electronically?
A. Over-the-counter C. Money Market
B. Bond Market D. Stock Market

5. Which of the following is a financial Institution?

A. Savings Account C. Stock Market
B. Cash D. Land Bank of the
Philippines

6. Which of the following is an example of financial market?

A. Savings Account C. Stock Market
B. Cash D. Land Bank of the
Philippines

7. Which of the following best describes financial Instruments?

A. These are place to trade stocks and bonds
B. It is something that has a value.
C. These are things that provide financial services.
D. It is a contract and things given to each party that has a
monetary value.

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 8. Which of the following greatly affects financial Market?
B. Capital B. Economy C. Market D. Technology
9. At what level does money markets involved large volume trades between
institutions and traders?
A. Retail level C. Critical level
B. Wholesale level D. None of the above

10. Which of the following is an example of brokerage firms?

A. Lending companies C. Mutual fund
B. Small and Medium Enterprises D. Savings Banks

Great job! You are almost done with this module.

References
Websites:

Will Kenton. (2020 March 3). Financial Markets. Retrieved July 24, 2020
from https://www.investopedea.com/terms/f/financialmarket.asp

Adam Hayes. April 21 2020. Financial Institutions. Retrieved July 24, 2020
from https://www.investopedea.com/terms/f/financialinstitution.asp

Will Kenton. March 29 2020. Financial Markets Instrument. July 24, 2020
from
https://www.investopedea.com/terms/f/financialinstrument.asp

Will Kenton. March 3 2020. Financial Markets. Retrieved July 24, 2020
from www.slodeshare.net/mobile/athaullah9/financial-institutions-
instruments-and-markets

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 KEY ANSWER

Pre-Test Jumpstart Deepen

1. A 1.A FINANCIAL INSTRUMENT

2. D 2. C Stocks
3. C 3. C Bonds
4. C 4. B Cash
5. D 5. D Insurance
6. B Mortgages
7. B FINANCIAL INSTITUTION
8. D Commercial Bank
9. B Investment Bank
10. C Insurance Companies
Brokerage Firms
FINANCIAL MARKET
Money Market
Over the counter Market
Bond Market

Gauge

1. A
2. A
3. D
4. A
5. D
6. C
7. D
8. D
9. D
10. C

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