Financial Markets 1. In the first chapter we discussed about trade-offs. We want to apply this concept to a discussion about the risk-return trade-off of an investment. a. First, define these terms: (3 marks) . Trade-off: . Risk of an investment: . Return of an investment: b. Now, explain what are the two risk-return trade-offs of an investment: . (2 marks) Trade-off #1: What it is: . (2 marks) Trade-off #2: What it is:2. Research about investment in mutual funds and in the stock market. Then explain why someone with a smaller amount of money to invest will more likely buy a mutual fund as opposed to shares of common stock (1 mark}. Include, in your explanation, a brief description of mutual funds (1 mark} and stocks {1 mark}, and how those investments differ {1 mark}. Answer: 3. (1 mark) What is a bond? (1 mark) How is it different from a bank loan? {1 mark) How is it the same? Answer: Business Ownership 4. If a business were to be sued, up to how much money would the owner(s) be liable for in each case? . (1 mark) sole proprietorship: . (1 mark) unlimited partnership: . (1 mark) corporation: 5. List and define three types of partnership. (3 marks) #1) #2) #3)Supply & Demand 6. List the main disadvantages of price floors and price ceilings. Use graphs to support your answer. {show both equilibrium price AND either the price floor or the price ceiling). a. {3 marks} Price floor: b. {3 marks) Price ceiling: 7. Why does competitive pricing not exist at concerts and sporting events to the same degree as in the agricultural sector? (2 marks) Answer: Graphic Analysis 8. Use the following axes to represent the given events. Be sure to label points (1 > 2), or lines (31 } S2 or D1 > D2). (1: before; 2: after). a. The price of gasoline falls. Show the b. The price of crude oil falls. Show the effect on the supply of gasoline. impact on the supply of gasoline. (2 marks) (2 marks) LL c. It is discovered that smoking is worse d. The price of gold is expected to rise in for people than previously expected. the near future. Show the effect on the Show the impact on demand for demand for gold. {2 marks} cigarettes. (2 marks) LL