assignement - them. Rate of capital formation would not be...

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Evan Burk 4/13/2011 FIN/370 Chapter Study Questions Prepare responses to the following chapter study questions located in Chapter 14 of the Financial Management: Principles and Applications text, by Keown. 1. 14-1. What are financial markets? What function do they perform? How would an economy be 2. worse off without them? 3. 14-2. Define in a technical sense what we mean by financial intermediary. Give an example of 4. your definition. 5. 14-3. Distinguish between the money and capital markets . 6. 7. 14.1: Financial Markets report price for each good; they are institutions and procedures that facilitate transactions in all types of financial claims or securities. They exist in order to allocate the supply of savings from those economic units with a surplus to those with a deficit. The economy would suffer without a developed financial market system because the wealth of the economy would be less without
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Unformatted text preview: them. Rate of capital formation would not be as high, followed by the slowed rate of stock contribution to dwellings, productive plant and equipment, inventory, and consumer durables. Normal business activities would be funded slowly or not at all. 8. 14.2: Financial Intermediaries are known also as the middle man between an investor and a firm. I would say it is kind of like a lessor. This is also referred to as a financial institution. An example of this would be like an insurance company, mutual funds, pension funds, and even investment dealers. 9. 14.3: Money Markets facilitates transactions using short-term financial instruments; whereas, Capital Markets facilitates transactions using long-term financial instruments....
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