An Introduction to Financial Markets

An Introduction to Financial Markets - An Introduction to 1...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
An Introduction to 1 Running Head: AN INTRODUCTION TO FINANCIAL MARKETS An Introduction to Financial Markets Susana Silvestri Grand Canyon University FIN-350 April 17, 2011
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
1. None of the following statements are correct. In each case, identify the error and correct the statement. Corrected statement A: A household’s savings are what is left from current income after current consumption expenditures and tax payments are made. Corrected statement B: Corrected statement C. a. A household’s current savings includes its current purchases of corporate stock as well as prior holdings of corporate stock and its current investment includes the equity it currently has in its house. A BUSINESS current savings includes its current purchases of corporate stock as well as prior holdings of corporate stock and its current investment includes the equity it currently has in its house. b. The change in a household’s wealth over a quarter is given by its wealth at the beginning of the quarter plus its savings during the quarter. The change in a household’s wealth over a PERIOD OF TIME is given by its wealth at the beginning of the PERIOD plus its savings during the PERIOD . The change in a household’s wealth is built up over time by a combination of current savings plus income earned from all our previously accumulated wealth. c. The ability of a household to borrow money from a bank to purchase a new PC is an example of the payments function of the financial markets, while the ability of the bank to make the loan is an example of the liquidity function. The ability of a household to borrow money from a bank to purchase a new PC is an example of the CREDIT function of the financial markets, while the ability of the bank to make the loan is an example of the liquidity function.
Background image of page 2
Corrected statement D: Corrected statement E: d. The ability of Treasury bills to retain their value over time is an example of the savings function of the economy, while the ability of a household to sell a Treasury bill on short notice with little risk of loss is an example of the liquidity function. The ability of Treasury bills to retain their value over time is an example of the savings function of the economy, while the ability of a household to sell a Treasury bill on short notice with little risk of loss is an example of the liquidity function. e. The ability of the Federal Reserve to manipulate interest rates is an example of the policy function of the financial markets, while the ability of households to earn interest on those investments affected by the Fed’s decision is an example of the risk-protection function of the financial markets. The ability of the Federal Reserve to manipulate interest rates is an example of the policy function of the financial markets, while the ability of households to earn interest on those investments affected by the Fed’s decision is an example of the risk-protection function of the financial markets.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Assets Mortgage 150,000.00 80,000.00
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 22

An Introduction to Financial Markets - An Introduction to 1...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online