Which of the following institutions may buy government bonds in BOTH the primary and the secondary market, in most developed countries? a. foreign investors b. large financial institutions with abundant liquidity c. corporations d. the central bank

Explain what happens in an economy when the financial markets limit access to capital. How does this affect economic growth and employment?

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.

A mortgage 105m is a loan that a person makes to purchase a house. Table 19.11 provides a list of the mortgage interest rate for several different years and the rate of inflation for each of those years. In which years would it have been better to be a person borrowing money from a bank to buy a home? In which years would it have been better to be a bank lending money?

Why can firms not just use their own profits for financial capital, with no need for outside investors?

What does it mean to hedge a financial transaction?

Why should a financial investor care about diversification?

What are the two main sides of the national savings and investment identity?

Imagine that a local water company issued 10,000 ten-year bond at an interest rate of 6. You are thinking about buying this bond one year before the end of the ten years, but interest rates are now 9. Given the change in interest rates, would you expect to pay more or less than 10,000 for the bond? Calculate what you would actually be willing to pay for this bond.