Chapter_5_Questions - Chapter5Questions 1.

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1. Briefly the methods of transferring capital in or economy. This transfer of capital can take place in the three different ways. a. Direct transfers of money and securities. The business delivers its  securities to savers, who in turn give the firm the money it needs, without  going through any type of financial institution. b. Indirect transfers through investment bankers. The company sells its stocks  or bonds to the investment bank, which in turn sells these same securities to  savers. The businesses’ securities and the savers’ money merely “pass  through” the investment banking house. c. Indirect transfers through a financial intermediary such as a bank or mutual  fund. The intermediary obtains funds from savers in exchange for its own  securities, and the intermediary uses this money to buy and hold businesses’  securities. 2. What is the difference between the following: a. Money and capital markets Money markets are the markets for short-term, highly liquid debt  securities. Capital markets are the markets for intermediate- or long- term debt and corporate stocks. b. Primary and secondary markets Primary markets are the markets in which corporations raise new  capital. Secondary markets are markets in which existing, already  outstanding, securities are traded among investors. c. Private and public markets  Private markets are the markets in which transactions are worked out  directly between two parties, such as bank loans and private debt  placements with insurance companies.  Public markets are the markets in which standardized contracts are  traded on organized exchanges, such as common stock and corporate  bonds. 3.
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This note was uploaded on 03/31/2011 for the course ACT 1111 taught by Professor Asd during the Spring '11 term at Troy.

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Chapter_5_Questions - Chapter5Questions 1.

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