Corporations do not actually raise any funds in secondary markets, so they are less important to the economy than primary markets. Comment.
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Referring to the financial environment, name two key differences between a financial intermediary and a manufacturing corporation.
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Why are you willing to make an indirect loan to your friend by putting funds in a savings account earning a 3 percent interest rate from the bank, which will lend him the money at a 7 percent interest rate, rather than loan this person the funds yourself directly?
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Do financial intermediaries have different functions?
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Which firms are most likely to use bank financing rather than to issue bonds or stocks to finance their activities? Why?
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Can you guess why mutual funds and pension funds have been growing rapidly in recent years at the expense of traditional financial institutions such as banks and insurance companies?
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Financial intermediaries will not exist for a world without information and transaction costs. True or false?
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If you buy a used car for $5,000 to start a job paying a fixed annual salary of $10,000 for the next year, should you take out a loan at 90% interest rate per year? What can be said on the opportunity cost of capital if you use the car for a commission based job?
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What do you think are possible reasons that prevent a financial market from operating efficiently?
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