1. What are agency costs? How do Financial Institutions (FIs) solve the information and related agency costs experienced when household savers invest directly in securities issued by corporations?

2. What are five general areas of FI specialness that are caused by providing various services to sectors of the economy?

3. Explain how a decrease in the discount rate affects credit availability and the money supply.

4. Describe how expansionary activities conducted by the Federal Reserve impact credit availability, the money supply, interest rates, and security prices. Do the same for contractionary activities.

5. Why have home equity loans become popular? What are securitized mortgage assets?

6. How do finance companies make money? What risks does this process entail?

7. How do these risks differ for a finance company versus a commercial bank?