1. Financial institutions in the U.S. economy Suppose Andrew would like to use $3,000 of his savings to make a financial investment. One way of making a financial investment is to purchase stock or bonds from a private company. Suppose TouchTech, a hand-held computing firm, is selling stocks to raise money for a new lab-a practice known as finance. Buying a share of TouchTech stock would give Andrew the firm. In the event that Touch Tech runs into financial difficulty, will be paid first. Suppose Andrew decides to buy 100 shares of TouchTech stock. Which of the following statements are correct? Check all that apply. O TouchTech earns revenue when Andrew purchases 100 shares, even if he purchases them from an existing shareholder. O The price of his shares will rise if Touch Tech issues additional shares of stock. O Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Andrew's shares to decline. Alternatively, Andrew could make a financial investment by purchasing bonds issued by the U.S. government. Assuming that everything else is equal, a U.S. government bond that matures 10 years from now most likely pays a interest rate than a U.S. government bond that matures 30 years from now.

Assume you are a junior member of the IPC (Investment Policy Committee) of a money management firm that manages a large pension fund. 10% of the investments, approximately $100,000,000 are invested in companies that are foreign and operate exclusively in the Eurozone (Those countries that operate as members of the European Union and use the euro as the single currency). The IPC is concerned about the recent instability of the Euro and asks you to work up some recommendations on how to hedge that portion of the portfolio that is exposed to currency and interest rate risks, as well as any other risks you may perceive.

Zeven Properties Limited (‘ZPL’) is a housebuilding contractor based in England specialising in building affordable private housing. ZPL’s shares are floated on the London Stock Exchange and are currently priced at £5 per share. The Board of Directors is planning an expansion, which will involve raising £10 million but has not decided on what form of finance should be raised. The Board is considering either a bank loan from the company’s existing bank (the Bank of Alba) or an equity investment from new shareholders.   On a completely different topic, at a recent Board meeting one of the non-executive directors suggested that ZPL’s remuneration committee should consider scrapping the company’s current share option scheme, since executive directors could be rewarded by the scheme even when they did not perform well. A second non-executive director disagreed, saying the problem was that even when directors acted in ways which decreased the agency problem, they might not be rewarded by the…

Our textbook claims that one of the key services banks provide is maturity intermediation: what exactly does this mean?  (Choose an answer from the list below; only one is correct.) Reference:  Chapter 11 and/or Chapter 1    Banks borrow money from their younger customers and lend it to their older customers. Banks gather small deposits and use them to make large investments, allowing small investors to collectively buy large assets. Banks are funded with deposits that they promise to return on demand but use them to make long-term loans, which creates a mismatch in the maturities of their assets & liabilities.

You are the chief financial officer (CFO) of Gaga Enterprises, an edgy fashion design firm. Your firm needs $11 million to expand production. How do you think the process of raising this money will vary if you raise it with the help of a financial institution versus raising it directly in the financial markets? ... The process of raising the money will vary if you raise it with the help of a financial institution versus raising it directly in the financial markets. Select all the statements below which support this statement: (Select all the answers that apply.) A. Raising the money directly in the financial markets will allow the Gaga Enterprises CFO to avoid the investment bank's commissions and thus raise more money at a lower cost per dollar raised. B. The investment banking institution will allow the Gaga Enterprises CFO to raise more money at a lower cost per dollar raised. C. Financial institutions, such as investment banks, provide expertise in the acquisition of funds. D.…

[Related to Solved Problem 11.13 Suppose that you intend to buy a house for $210,000. Calculate your bank leverage ratio for this investment in each of the following situations: You pay the entire $210,000 price in cash Bank leverage ratio is equal to

Suppose Clinton decides to use $9,500 currently held as savings to make a financial investment. One method of making a financial investment is the purchase of stock or bonds from a private company. Suppose Arcadia, a biomedical research firm, is selling stocks to raise money for a new lab. This practice is called finance. Buying a share of Arcadia stock would give Clinton the firm. In the event that Arcadia runs into financial difficulty, will be paid first. Suppose Clinton chooses to buy 250 shares of Arcadia stock. Which of the following statements are correct? Check all that apply. The Dow Jones Industrial Average is an example of a stock exchange where he can purchase Arcadia stock. Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Clinton's shares to decline. The price of his shares will rise if Arcadia issues additional shares of stock. Alternatively, Clinton could undertake their financial investment by purchasing bonds…