PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 14, Problem 13PS
Financial markets and intermediaries 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:
- a. Investor to financial intermediary, to financial markets, and to the corporation.
- b. Investor to financial markets, to a financial intermediary, and to the corporation.
- c. Investor to financial markets, to a financial intermediary, back to financial markets, and to the corporation.
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Briefly explain the following investment channels with each one’s own returns and Risks.
Bank Deposits
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Private Company’s shares
Precious metal investment
........ is a link between savers & borrowers, helps to establish a link between savers & investors
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a . Money market
b . Marketing
c. None
d . Financial market
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Which function of a financial intermediary reduces transaction and information costs between a corporation and individual which may encourage a higher rate of savings?
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Administration of the payments mechanism
b.
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c.
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Chapter 14 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 14 - Terminology Fill in the blanks, using the...Ch. 14 - Prob. 2PSCh. 14 - Sources of funds True or false? a. Net stock...Ch. 14 - Prob. 4PSCh. 14 - Company ownership What do we mean when we say that...Ch. 14 - Prob. 6PSCh. 14 - Prob. 7PSCh. 14 - Prob. 8PSCh. 14 - Corporate debt Which of the following features...Ch. 14 - Financial markets and intermediaries. True or...
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- Which of the following can be described as involving indirect finance? a. People pay premiums to an insurance company b. A corporation issues new shares to people c. People lend money to their friends d. People buy bonds from companiesarrow_forwardWhich statement is not correct? A. The main objective (role) of financial intermediaries is to convert savings of SSU’s into investments. B. Financial intermediaries purchase financial claims with a set of characteristics from DSU’s and sell financial claims with characteristics tailored to the desires of the SSU’s. C. Financial intermediaries normally absorb the risks from SSU’s and manage the risks by investing the funds received from SSU’s into various securities. D. Financial intermediaries serve solely as intermediaries with the financial markets and never serve as investors. E. none of the abovearrow_forwardFamiliarization of investment types. Identify keywords if it is; Deposit Fund Bond Stock Property 1. Collateral 2. Shareholder 3. Creditor 4. Debtholder 5. Equity 6. Supply of capital 7. Safekeeping 8. Money market 9. Real estate 10. Hard assetarrow_forward
- Which of the following statements is true with regard to financial markets O a. They link the households which save funds and business firms which invest these funds: O b. They work as an intermediary between the savers and the investors by mobilising funds between them c. They allocate funds available for investment into their most productive investment opportunity d.All of the optionsarrow_forwardWhich of the following can be considered as financial institutions in a good financial system? a. Treasuries b. Stock Exchanges c. Banks d. Allarrow_forwardThe financial markets play an important role in channeling funds from savers to borrowers. Which of the following illustrates this function of financial markets? Investors purchase assets like real estate and gold from other investors. Investors purchase capital goods which are used in production by borrowers. Investors deposit funds into interest-bearing accounts which are then loaned to borrowers. Investors purchase securities that are issued by firms and governments.arrow_forward
- Title Every financial market has the following characteristic: Description Function of Financial Markets 1) Every financial market has the following characteristic: A) It determines the level of interest rates. B) It allows common stock to be traded. C) It allows loans to be made. D) It channels funds from lenders-savers to borrowers-spenders. 2) Financial markets have the basic function of A) getting people with funds to lend together with people who want to borrow funds. B) assuring that the swings in the business cycle are less pronounced. C) assuring that governments need never resort to printing money. D) providing a risk-free repository of spending power. 3) Financial markets improve economic welfare because A) they channel funds from investors to savers. B) they allow consumers to time their purchase better. C) they weed out inefficient firms. D) eliminate the need for indirect finance.arrow_forwardWhich of the following would be part of a financial manager's investment decision? *a. Collecting receivables from customersb. Paying loansc. Allocating funds for permanent current assetsd. Paying dividends to shareholdersarrow_forwardChoose the letter The financial markets are composed of money markets and _____________. *a. lending institutionsb. lendersc. capital marketsd. Creditorse. Banking Institutionsarrow_forward
- (a. investment banking b. insurance firms c. commercial banking d. mutual fund e. pension fund) is a transformer of short term liabilities to long term assets. e d b c aarrow_forwardIf Firm A's business is to obtain savings from individuals and then invest them in financial assets issued by other firms or individuals, Firm A is a financial intermediary.a.Trueb.Falsearrow_forwardWhich of the following is a Long Term Source of Finance? a. Customer Advances b. Equity Shares c. Trade Credit d. Bank Creditarrow_forward
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