Coverage: Chapters 1, 2,3 (PVSFV), quotes on Treasury securities, class discussions Question 40 In the federal funds market. a bank with reserve deficit can borrow from the one with surplus and pays the federal funds rate. a bank can lend to its best customer and charges the prime rate. It is a market for long term borrowing when a bank issues long term CDs. the Department of Treasury issues new Treasury securities. Not saved The government regulates financial markets for two main reasons: to ensure soundness of the financial system and to increase the information available to investors. to improve control of monetary policy and to increase the information available to investors. to ensure that financial intermediaries do not earn more than the normal rate of return and to improve control of monetary policy. to ensure soundness of financial intermediaries and to prevent financial intermediaries from earning less than the normal rate of returi One of the factors that contribute to possible higher rates of returns from private equity and hedge funds is lack of liquidity high initial amount of investments they invest only in blue chip stocks they invest in securities guaranteed by governments The term proxy fight refers to the solicitation of shareholder votes on certain important issue. sending a representative to attend a board meeting. a corporate action to provide disclosure of information to financial markets. the announcement of M&A decision by the board of directors