mfi homework 6.docx - Jason Chiu 2 intermediaries are able...

  • No School
  • AA 1
  • 1

This preview shows page 1 out of 1 page.

Jason Chiu 2: intermediaries are able to operate with lower transaction relative to individual lenders or borrowers. 3: they pool many small deposits together and specialize in loan risk assessment 4: the free rider problem. Other investors are able to benefit from their information without paying for it, meaning individual investors have no incentive to gather their own information about borrowers. Intermediaries avoid this problem because they make private loans instead of buying securities. 5: certificates are insured by the FIDC so they are low risk, while offering them to the next individual person is significantly more risky due to the default risk. 7: OTC because the NYSE would have a lot more information than the OTC would. The lemon problem is when there isn’t enough information and a buyer is just trying to buy at average price. 11: Asymmetric information can lead to bank runs where people scramble to withdraw their funds before banks run out of money. These bank runs can be caused by uncertainty after one
Image of page 1

Unformatted text preview: bank become insolvent and cannot pay their debts. 13: Buying information to better yourself on your investments from a private company would cost a lot of money, and that information will be freely given to those who follow your lead. Meanwhile monitoring the businesses also cost time and money and others will know this and allow you to do all the work 17: Asymmetric information gives uncertainty to people who want to purchase bonds or securities. The government regulates the financial markets so the uncertainty is lowered and they increase cash flows 18: True because the borrower has much at risk as well and does not want to lose his collateral 19: All the regulations cause higher prices, especially the Sarbanes-Oxley Act and Global Legal Settlement of 2002. Costs are killing corporations and reducing US capital or poorer management is hired to make up for things...
View Full Document

  • Fall '19

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask You can ask ( soon) You can ask (will expire )
Answers in as fast as 15 minutes