The following are correct statements about the composition of Financial Markets,EXCEPT:O Financial Transactions can be categorized as Direct Finance and Indirect Financetypes.OIndirect Finance occurs when a financial intermediary conducts the transactionbetween savers and borrowers.If a Commercial Bank uses money from depositors and lend the money to acorporation, that is considered Direct Finance.OIf a Corporation issues stocks and sells it to individual investors, that isconsidered Direct Finance.

To identify the correct statement about the composition of financial markets.

Answered: The following are correct statements…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter17: Financial Markets

Section: Chapter Questions

Problem 1SCQ: Answer these three questions about early-stage corporate finance: Why do very small companies tend...

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The Darkroom Windowshade Company has 100,000 shares of stock outstanding. The investors in the firm awn the following numbers of shares: investor 1 has 20,000 shares; investor 2 has 18,000 shares; investor 3 has 15,000 shares; investor 4 has 10,000 shares; investor 5 has 7,000 shares; and investors 6 through 11 have 5,000 shares each. What is the minimum number of investors it would take to vote to change the companys top management? If investors I and 2 agree to vote together, can they be certain of always getting their way in how the company will he run?
Answer these three questions about early-stage corporate finance: Why do very small companies tend to raise money from private investors instead of through an IPO? Why do small, young companies often prefer an IPO to borrowing from a bank or issuing bonds? Who has better information about whether a small firm is likely to earn profits, a venture capitalist or a potential bondholder, and why?
If you owned a small firm that had become somewhat established, but you needed a surge of financial capital to cant out a major expansion, would you prefer to raise the funds through borrowing or by issuing stock? Explain your choice.
Question 9 Which of the following takes place in the direct finance market? O Ownership in corporations is sold in the form of preferred stock. O Firms borrow funds from banks. O Banks offer savings accounts to customers. O Deposits from savers are accumulated and loans made to borrowers.
Paysl Question 20 Which one of the following is an incorrect statement about US financial system? O Saving and investment are important determinants of long run growth in GDP and living standards. O The primary advantage of mutual funds is that they allow people with small amounts of money to diversity their holdings O Financial Intermediaries are financial institutions through which savers can directly provide funds to borrowers O The institutions that make up this system-the bond market, the stock market, banks, and mutual funds-- have the role of coordinating the economy's saving and investment. Question 21 Which one of the folawing is an incorrect statement about the history of The US Central Bank? O In 1836. President Andrew Jackson closed the Second Bank of the United States (SBUS) because of his deep distrust of financial elites. It led to a period of rapid monetary expansion and inflation, which was soon folowed by financial panics in 1837 and 1839 and a severe recession O The…
Suppose the economy of a large nation has a defense industry, a banking industry, and apharmaceutical industry. 1-unit output of defense requires 0.6 inputs of defense, 0.2 inputs ofbanking, and 0.2 inputs of pharmaceuticals. 1-unit output of banking requires 0.1 inputs ofdefense, 0.4 inputs of banking, and 0.5 inputs of pharmaceuticals. 1-unit output of pharmaceuticalsrequires 0.1 inputs of defense, 0.2 inputs of banking, and 0.2 inputs of pharmaceuticals.If the nation wants to have surpluses of 106 units of defense production, 243 units of bankingproduction, and 216 units of pharmaceutical production, find the gross production of eachindustry.
As and example of a possible investment restriction, an insurer mah only be allowed to invest up to 20 percent of its assets in common stock. What penalty is imposed upon the insurer that invests 30 percent of available assets in common stock?A. The additional 10 percent must be disposed of by year endB. The state regulators would impose a 10 percent fine on the insurer.C. The additional 10 percent would be a nonadmitted asset.D. The additional 10 percent would only be listed at cost.
What is meant by "demand deposits"? O a) Bank accounts where you can't withdraw money by writing a check, but can withdraw the money at a bank-or can transfer it easily to a checking account. O b) An institution that operates between a saver with financial assets to invest and an entity who will receive those assets and pay a rate of return. c) Deposits in banks that are available by making a cash withdrawal or writing a check. C PRECEDENS 22 d) A bank's liabilities can be withdrawn in the short term while its assets are repaid in the long term.
Due date: Friday November 20, 2015Too Big to FailAmerican International Group, INC (AIG) caseIntroductionAIG is the story of a company, and its network of financial partners, who tookunprecedented risk and fell because of it. To prevent global economic disaster, the U.S.government came to its rescue. This has resulted in the biggest taxpayer bailout of a privatecompany in American history.BackgroundAmerican International Group, Inc. â€“ also known as AIG â€“ is an Americanmultinational insurance corporation with more than 88 million customers in 130 countries. AIGcompanies employ over 64,000 people in 90 countries. The company operates through three corebusinesses: AIG Property Casualty, AIG Life and Retirement and United Guaranty Corporation(UGC). AIG Property Casualty provides insurance products for commercial, institutional andindividual customers. AIG Life and Retirement provides life insurance and retirement services inthe United States. And UGC focus…
In the Loanable Funds Market Model, ceteris paribus, it typically follows that when the federal government runs a budget deficit, there will be préssure on interest rates and pressure on private investment. This is referred to as Select one: O a. upward; upward; crowding out Ob. upward; downward; crowding out O c. downward; downward; financial intermediation Od. downward; upward; financial intermediation.
Which type of financial intermediary provides individual investors with professional management of their money and diversification in order to limit the risk of investing? A. mutual funds B. insurance companies C. hedge funds D. investment banks
The stock markets are the most watched and reported of the financial markets because: 1. They are predictors, bellwethers of economic activity II. They are the most widely held financial securities III. Many individual investors own them in their retirement accounts O. I O II. I & I O II.I, II & II O IV. I & II

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