Homework_1 - 42 PART I Introduction investment bank p 26...

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42 PART I Introduction equities, p. 26 Eurobond, p. 28 Eurocurrencies, p. 28 Eurodollars, p. 28 exchanges, p. 27 financial intermediation, p. 29 financial panic, p. 39 foreign bonds, p. 28 intermediate-term, p. 26 investment bank, p. 26 liabilities, p. 24 liquid, p. 27 liquidity services, p. 31 long-term, p. 26 maturity, p. 26 money market, p. 27 moral hazard, p. 33 over-the-counter (OTC) market, p. 27 portfolio, p. 32 primary market, p. 26 risk, p. 31 risk sharing, p. 31 secondary market, p. 26 short-term, p. 26 thrift institutions (thrifts), p. 34 transaction costs, p. 29 underwriting, p. 26 Questions and Problems Questions marked with an asterisk are answered at the end of the book in an appendix, “Answers to Selected Questions and Problems.” *1. Why is a share of IBM common stock an asset for its owner and a liability for IBM? 2. If I can buy a car today for $5,000 and it is worth $10,000 in extra income next year to me because it enables me to get a job as a traveling anvil seller, should I take out a loan from Larry the Loan Shark at a 90% interest rate if no one else will give me a loan? Will I be better or worse off as a result of taking out this loan? Can you make a case for legalizing loan- sharking? *3. Some economists suspect that one of the reasons that economies in developing countries grow so slowly is that they do not have well-developed financial mar- kets. Does this argument make sense? 4. The U.S. economy borrowed heavily from the British in the nineteenth century to build a railroad system. What was the principal debt instrument used? Why did this make both countries better off? *5.
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Homework_1 - 42 PART I Introduction investment bank p 26...

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