Question
1. For each situation, explain why seeking out an individual saver to borrow money from is not ideal. Then, identify which function of banks eliminates
1. For each situation, explain why seeking out an individual saver to borrow money from is not ideal. Then, identify which function of banks eliminates the problem.
Hint: Banks serve five functions. Read all the scenarios, then determine which function best addresses each situation. A function will only be used once.
a. As a first-year student, you need to borrow $20,000 for school. You intend to repay this loan over time after you graduate.
b. You are starting a business in a new industry and need $300 million for your initial investment.
c. You need to take out a $15,000 loan to purchase a new car. No one who knows you personally has the money to lend.
d. You want to be able to pay your bills online instead of paying for everything using cash.
3. Your parents are thinking about purchasing bonds with a 25-year term, but they are a little worried that they might need the money before the 25-year term is up. How would they go about accessing the money if they needed it before the end of the term?
5. For each part, determine whether you should invest in stocks or bonds. Explain your reasoning.
a. You want a high return and are not concerned about risk.
b. You would like to participate in how the companies you invest in are managed.
c. You are worried about losing money if a company declares bankruptcy.
d. You want a guaranteed, regular payment from your investment.
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