1. Capital allocation process The capital allocation process involves the transfer of capital among different entities that include individuals, small businesses, banks, financial intermediaries, companies, mutual funds, and other market participants. In a developed market economy, capital flows freely between entities that want to supply capital to those who want it. This flow of capital can be classified in three ways. In the table below, identify the nature of capital transfer given in the scenario with its appropriate classification: Indirect Transfers through Investment Banks Indirect Transfers through Financial Intermediaries Direct Transfers Scenario Elliot invests $25,000 by purchasing 1,000 shares of an emerging markets mutual fund. This mutual fund invests in companies in Brazil, India, and China. He bought the mutual fund from the mutual fund company. Based in Grass Valley, California, L & M Seeds Co. is a small company that manufactures organic seeds. To raise capital, the company sells stocks directly to savers in Grass Valley without involving any bank or financial intermediary. Erin borrows money from her uncle to buy a new laptop. W2 Corp. needs capital to finance a new product line. It borrows money in the form of long-term bonds underwritten by an investment bank. Grade It Now Save & Continue Continue without saving 1. Capital allocation process The capital allocation process involves the transfer of capital among different entities that include individuals, small businesses, banks, financial intermediaries, companies, mutual funds, and other market participants. In a developed market economy, capital flows freely between entities that want to supply capital to those who want it. This flow of capital can be classified in three ways. In the table below, identify the nature of capital transfer given in the scenario with its appropriate classification: Indirect Transfers through Investment Banks Indirect Transfers through Financial Intermediaries Direct Transfers Scenario Elliot invests $25,000 by purchasing 1,000 shares of an emerging markets mutual fund. This mutual fund invests in companies in Brazil, India, and China. He bought the mutual fund from the mutual fund company. Based in Grass Valley, California, L & M Seeds Co. is a small company that manufactures organic seeds. To raise capital, the company sells stocks directly to savers in Grass Valley without involving any bank or financial intermediary. Erin borrows money from her uncle to buy a new laptop. W2 Corp. needs capital to finance a new product line. It borrows money in the form of long-term bonds underwritten by an investment bank. Grade It Now Save & Continue Continue without saving
