hw 2
13. True or False?
a. Financing for public corporations must flow through financial markets. False
b. Financing for private corporations must flow through financial intermediaries. False
c. The sale of policies is a source of financing for insurance companies. True
d. Almost all foreign exchange trading occurs on the floors of the FOREX exchanges in New York and London. False
e. The opportunity cost of capital is the capital outlay required to undertake a real investment opportunity. True
f. The cost of capital is the interest rate paid on borrowing from a bank or other financial institution False
14. Liquidity. Securities traded in active financial markets are liquid assets.
Explain why liquidity is important to individual investors and to mutual funds.
Liquidity. Securities traded in active financial markets are liquid assets. Explain why liquidity is important to individual investors and to mutual funds
Liquidity is important because individual investors and mutual funds may need to have the ability to turn investment into cash quickly. There may get a lower rate of return but, if they are in a hurry, they get their money very fast.
16. Corporate Financing. Financial markets and intermediaries channel savings from investors to corporate investment. The savings make this journey by many different routes. Give a specific example for each of the following routes:
g. Investor to financial intermediary, to financial markets, and to the corporation. An investor buys shares in a mutual fund, which buus parts of a new stock by a rapidly growing software company.
h. Investor to financial markets, to a financial intermediary, and to the corporation. An investor buys shares issued by the bank of new york, which lends money to a regional department store chain.
i. Investor to financial markets, to a financial intermediary, back to financial markets, and to the corporation. An investor buys part of a new stock issue by the regional life insurance company,
a. Financing for public corporations must flow through financial markets. False
b. Financing for private corporations must flow through financial intermediaries. False
c. The sale of policies is a source of financing for insurance companies. True
d. Almost all foreign exchange trading occurs on the floors of the FOREX exchanges in New York and London. False
e. The opportunity cost of capital is the capital outlay required to undertake a real investment opportunity. True
f. The cost of capital is the interest rate paid on borrowing from a bank or other financial institution False
14. Liquidity. Securities traded in active financial markets are liquid assets.
Explain why liquidity is important to individual investors and to mutual funds.
Liquidity. Securities traded in active financial markets are liquid assets. Explain why liquidity is important to individual investors and to mutual funds
Liquidity is important because individual investors and mutual funds may need to have the ability to turn investment into cash quickly. There may get a lower rate of return but, if they are in a hurry, they get their money very fast.
16. Corporate Financing. Financial markets and intermediaries channel savings from investors to corporate investment. The savings make this journey by many different routes. Give a specific example for each of the following routes:
g. Investor to financial intermediary, to financial markets, and to the corporation. An investor buys shares in a mutual fund, which buus parts of a new stock by a rapidly growing software company.
h. Investor to financial markets, to a financial intermediary, and to the corporation. An investor buys shares issued by the bank of new york, which lends money to a regional department store chain.
i. Investor to financial markets, to a financial intermediary, back to financial markets, and to the corporation. An investor buys part of a new stock issue by the regional life insurance company,