Homework Question 1
Homework 1:
Please complete your homework on separate pages. For multiple choices question, you only need to write down the answers.
1. Lanni Products is a start-up computer software development firm. It currently owns computer equipment worth $30,000 and has cash on hand of $20,000 contributed by Lanni’s owners. For each of the following transactions, identify the real and/or financial assets that trade hands. Are any financial assets created or destroyed in the transaction?
a. Lanni takes out a bank loan. It receives $50,000 in cash and signs a note promising to pay back the loan over three years.
b. Lanni uses the cash from the bank plus $20,000 of its own funds to finance the development of new financial planning software.
c. Lannie sells the software product to Microsoft, which will market it to the public under the Microsoft name. Lanni accepts payment in the form of 1,500 shares of Microsoft stock.
d. Lanni sells the shares of stock for $80 per share and uses part of the proceeds to pay off the bank loan.
2. Give an example of three financial intermediaries and explain how they act as a bridge between small investors and large capital markets or corporations.
3. The rate of return on investments in large stocks has outpaced that on investments in Treasury bills by an average of about 9.4% since 1926. Why, then, does anyone invest in T-bills?
4. Do the following multiple choices questions.
1. _______ are the least organized markets. A) Brokered markets B) Dealer markets C) Direct search markets D) Auction markets
2. In 1999 eleven countries established a new currency called the ______ . A) Nafta B) Global C) Euro D) Zeppo 3. Derivative securities can be based on ____ . A) currencies B) common stocks C) home mortgages D) all of the above 4. ____ is not a derivative security. A) A share of common stock B) A call option C) A futures contract D) all of the above are derivative
Please complete your homework on separate pages. For multiple choices question, you only need to write down the answers.
1. Lanni Products is a start-up computer software development firm. It currently owns computer equipment worth $30,000 and has cash on hand of $20,000 contributed by Lanni’s owners. For each of the following transactions, identify the real and/or financial assets that trade hands. Are any financial assets created or destroyed in the transaction?
a. Lanni takes out a bank loan. It receives $50,000 in cash and signs a note promising to pay back the loan over three years.
b. Lanni uses the cash from the bank plus $20,000 of its own funds to finance the development of new financial planning software.
c. Lannie sells the software product to Microsoft, which will market it to the public under the Microsoft name. Lanni accepts payment in the form of 1,500 shares of Microsoft stock.
d. Lanni sells the shares of stock for $80 per share and uses part of the proceeds to pay off the bank loan.
2. Give an example of three financial intermediaries and explain how they act as a bridge between small investors and large capital markets or corporations.
3. The rate of return on investments in large stocks has outpaced that on investments in Treasury bills by an average of about 9.4% since 1926. Why, then, does anyone invest in T-bills?
4. Do the following multiple choices questions.
1. _______ are the least organized markets. A) Brokered markets B) Dealer markets C) Direct search markets D) Auction markets
2. In 1999 eleven countries established a new currency called the ______ . A) Nafta B) Global C) Euro D) Zeppo 3. Derivative securities can be based on ____ . A) currencies B) common stocks C) home mortgages D) all of the above 4. ____ is not a derivative security. A) A share of common stock B) A call option C) A futures contract D) all of the above are derivative