Ch $02$: HW $-$ Financial Markets and Institutions

Description of Transaction

Type of Market

You go to an auto dealer and buy a new car. You drive the car home immediately after

Physical asset markets

making the payment.

Description of Transaction

Type of Market

A farmer agrees to sell $10,000$ bushels of wheat at the rate of $$4\mathrm{.}50$ per bushel to a buyer Futures markets

in three months. A regulated exchange, such as the Chicago Board of Trade, completes the transaction.

Description of Transaction

Type of Market

Sheila saves $$10,000$ and buys a certificate of deposit $($CD$)$ that will mature in six months.

Money markets

Description of Transaction

Type of Market

Martha Stewart sold $3,928$ shares of ImClone stock on December $27,2001.$

Secondary markets

Source:

Foxnews.com, Jan. $20,2004.$

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 rises, thereby offsetting the processors' increased costs$/$decreased net income. In this example, the corn processor is $$ hedging $.$