PS_CH2_ANS - Chapter 2 Problem Set ECO 21000 Money and Banking 01 September 2015 1 Which of the following can be described as direct nance A You take

PS_CH2_ANS - Chapter 2 Problem Set ECO 21000 Money and...

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Chapter 2 Problem Set ECO 21000: Money and Banking 01 September 2015 1. Which of the following can be described as direct finance? A) You take out a mortgage from your local bank. B) You borrow $ 2500 from a friend. C) You buy shares of common stock in the secondary market. D) You buy shares in a mutual fund. 2. Securities are for the person who buys them, but are for the individual or firm that issues them. A) assets; liabilities B) liabilities; assets C) negotiable; nonnegotiable D) nonnegotiable; negotiable Answer: A 3. Equity holders are a corporation
s . That means the corporation must pay all of its debt holders before it pays its equity holders. A) debtors B) brokers C) residual claimants D) underwriters
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Unformatted text preview: Answer: C 4. A corporation acquires new funds only when its securities are sold in the A) primary market by an investment bank. B) primary market by a stock exchange broker. C) secondary market by a securities dealer. D) secondary market by a commercial bank. Answer: A 5. Collateral is the lender receives if the borrower does not pay back the loan. 1. A) a liability 1 2. B) an asset 3. C) a present 4. D) an o ↵ ering 5. Answer: B 6. Are interest rates larger for short-term or long-term bonds? Why? 7. Explain how a repurchase agreement works (in your own words!). 8. Why do Fnancial intermediaries exist? 2...
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  • Fall '15
  • eric
  • Debt, local bank

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