Chapter 2 HW - Valerie Bodden K. (10-0014) Professor Bairan...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Valerie Bodden K. (10-0014) Professor Bairan Financial Markets and Institutions September 8, 2011 Chapter 2 Questionnaire 1. Why is the holding of a claim on a financial intermediary by an investor considered an indirect investment in another entity? Holding of a claim on a financial intermediary by an investor is considered an indirect investment in another entity because the person’s funds are passed through the intermediary towards the firm. This means tat the individual has an indirect claim on the firm . 2. The insightful Management Company sells financial advice to investors. This is the only service provided by the company. Is this company a financial intermediary? Explain your answer. This company is not a financial intermediary because it does not take deposits and lacks liabilities, basically does not do any financial transaction. 3. Explain how a financial intermediary reduces the cost of contracting and information processing. Financial intermediaries reduce costs of contracting and information processing because they are part of the day-to-day business. An investor who buys a financial claim of a financial intermediary and the issuers of assets, which benefit the borrower. 4. “All financial intermediaries provide the same economic functions. Therefore, the same investment strategy should be used in the management of all financial
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

Chapter 2 HW - Valerie Bodden K. (10-0014) Professor Bairan...

This preview shows document pages 1 - 2. Sign up to view the full document.

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