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Chapter 2 hw solutions

Chapter 2 hw solutions - Chapter2 LearningObjectives ,...

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Chapter 2 Financial Markets and Institutions Learning Objectives After reading this chapter, students should be able to: Describe three ways in which the transfer of capital takes place. List some of the  many  different types of financial markets, and identify several recent trends taking  place in the financial markets. Identify some of the most important money and capital market instruments, and list the characteristics of  each. Compare and contrast major financial institutions. Distinguish between the two basic types of stock markets. Identify the three classifications of stock market transactions. Read stock quotations from a variety of sources/publications. Briefly explain the Efficient Markets Hypothesis (EMH), identify the three levels of efficiency, and  discuss the implications of market efficiency. Briefly discuss behavioral finance and its impact on the support for EMH. Chapter 2:  Financial Markets and Institutions Learning Objectives 103
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Lecture Suggestions Chapter 2 presents an overview of financial markets and institutions and it leads right into the next chapter.  Additionally, students have an interest in financial markets and institutions. What we cover, and the way we cover it, can be seen by scanning the slides and Integrated Case  solution for Chapter 2, which appears at the end of this chapter solution.  For other suggestions about the  lecture, please see the “Lecture Suggestions” in Chapter 5, where we describe how we conduct our classes. DAYS ON CHAPTER:  1 OF 58 DAYS (50-minute periods) 104 Lecture Suggestions Chapter 2:  Financial Markets and Institutions
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Answers to End-of-Chapter Questions 2-1 The prices of goods and services must cover their costs.   Costs include labor, materials, and  capital.  Capital costs to a borrower include a return to the saver who supplied the capital, plus a  mark-up (called a “spread”) for the financial intermediary that brings the saver and the borrower  together.  The more efficient the financial system, the lower the costs of intermediation, the lower  the costs to the borrower, and, hence, the lower the prices of goods and services to consumers.
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