Questions

1. Corporate Financing. How can a small, private firm finance its capital investments? Give two or three examples of financing source

2. Financial Markets. The stock and bond markets are not the only financial markets. Give two or three additional examples

3. Financial Market and Institutions. True or False?

1. Financing for public corporations must flow through financial markets

False

2. Financing for private corporations must flow through financial intermediaries

False

3. Almost all foreign exchange trading occurs on the floors of the FOREX exchanges in New York and London

True

4. Derivative markets are a major source of finance for many corporations

5. The opportunity cost of capital is the capital outlay required to undertake a real investment opportunity.

6. The cost of capital is the interest rate paid on borrowing from a bank or other financial institution

10. Liquidity. Securities traded in active financial markets are liquid assets. Explain why liquidity is important to individual investors and to mutual funds.

11.Liquidty. Bank deposits are liquid; you can withdraw money on demand. How can the bank provide this liquidity and at the same time make illiquid loans to businesses?

12. Financial Institutions. Summarize the difference between a commercial bank and an investment bank

15. Financial Markets and Intermediaries. List the major functions of financial markets and intermediaries in a modern financial system.