Attempts: 03 Keep the Highest: 0.3/1 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 classifications Indirect Transfers through Investment Banks Direct Transfers Indirect Transfers through Financial Intermediaries 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. o A small startup firm has each of the partners contribute $50,000 in capital to help the company make payroll for the next three months. Israel launched a 10-year global bond issue of $1.5 billion in early 2009. Leading Investment banks such as Citigroup, Deutsche Bank, and Goldman Sachs managed the deal. (Source: Reuters.com, Mar. 18, 2009.) O Steve's grandfather loans him $30,000 to start a small coffee shop in the East Village in Manhattan o the kinds of markets in which financial transactions take place. You are preparing to take an exam in your finance class, and you've been making flash cards on different markets and transactions. Indicate markets in which each of the following transactions will be traded: Type of Market Description of Transaction A student sells his old computer at a computer hardware store and gets $150 for it. He uses this cash to buy computer accessories, Type of Market Description of Transaction An oil trader buys contracts at the New York Mercantile Exchange, and he locks in the current futures price of heating oil for delivery in the winter season. Type of Market Description of Transaction Abbey allocates 80% of her portfolio for investments in short-term US Treasury bills. Type of Market Description of Transaction US banks raise additional capital by issuing new stocks and bonds to repay the money they received from the government during the 2008 financial crisis. A corn processor in Nebraska has decided to purchase a futures contract for corn. The contract will increase in value if the price of corn offsetting the processors' increased costs/decreased net income. In this example, the corn processor is Grade It Now Save & Continue
