Makes the system integrated you will have more

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Makes the system integrated You will have more category 2 firms entering the private sector which will harm the ability for category 1 firms to conduct business in the private market. These category 2 firms are bigger and will profit more (by selling securities for less) than the category 1 firms. iv. Is rule 144a consistent with the SEC’s mission of protecting investors? SEC only tries to help small investors Yes
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Debt- lender need to control risk Collateral (one form of security) in commercial lending- provide lender with a way to control the borrower’s behavior and reducing risk of default Leasing-variation on using collateral, lending company buys equipment itself and then lends the equipment to this frim rather than loaning them money Guarantee (another form of security)- a third party promise to repay a debt if the borrower defaults, party has better credit than the borrower Science of financial engineering: separating credit risk from funding Arms-length lending: finance that does not involve continued monitoring Public issue- direct lending through financial markets Relationship finance: continuous monitoring of borrower by lender Private loans- indirect financing through financial intermediaries Question 4 deleted content: o Government- Municipal bonds- bonds issue by local and regional governments, insured. Recently shifted from relationship to arm’s length o Corporate companies issuing bonds- To public- must be low-risk to low-maintenance. Must be large and established corporations and engaged in relatively low risk business EX: RAILROADS AND UTILITIES o International bond market Eurobond market o Mutual funds o Pension funds Ill-suited: o Private placement (two main types = traditional and the 144a) o Junk bonds o Intermediary specialized in controlling risk- bank and financial companies
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