Financial Markets and International Capital FlowsChapter 11 Learning Objectives. You should be able to:Coupon BondSlide 4StocksInternational Capital FlowsBalance of PaymentsSaving & Investment in International EconomyFinancial Markets and International Capital FlowsChapter 11Chapter 11 Learning Objectives. You should be able to:•Identify the features of bonds and stocks.•Define capital inflows and capital outflows.•Relate the trade balance to capital inflows and outflows.•Relate national saving rates to international capital flows.Coupon BondMost bonds with maturities greater than a year are of this form.Coupon bonds issued byFederal government (Treasurys)State and local governments (munis)Corporations (corporates)Stocks•Represent shares of ownership.•Quarterly dividends.•Price reflects expected future profitability.International Capital Flows•Capital inflows: foreign investors buying domestic assets•Capital outflows: domestic investors buying foreign assets.Balance of PaymentsNX + KI = 0→ KI = -NXSaving & Investment in International EconomyY = C + I + G + NXY – C – G – NX = I-NX = KIY – C – G = S→ S + KI =