7211TutAnswersWk3_109

7211TutAnswersWk3_109 - Tutorial Answers for Week 3 1. What...

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Tutorial Answers for Week 3 1. What is a liquid asset? A liquid asset is one that is easily converted to cash, without a significant loss of value. 2. What are some examples of agency costs? Direct agency costs – monitoring costs, the purchase of something for management that cannot be justified from the risk-return standpoint (e.g. purchase of a company private jet). Indirect agency costs – management’s tendency to forgo risky or expensive projects that could be justified from a risk-return standpoint due to fear of failure and looking bad. 3. What are the types of financial markets? What type of market is NYSE? Financial markets can be classified as money markets – where the trading of short-term debt securities is made, and capital markets where the trading of long-term debt securities and share is made. Within the capital markets, we can further classify into primary markets – where securities are issued for the first time and secondary markets – where securities that have already been issued are traded between individuals. NYSE is a secondary capital markets where shares are traded.
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7211TutAnswersWk3_109 - Tutorial Answers for Week 3 1. What...

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