The flow of funds through financial markets increases the volume of savings and investment by: maintaining low interest rates. storing large quantities of cash. providing savers with a variety of ways to lend to borrowers. offering lower interest rates than could be obtained directly from borrowers.

The flow of funds through financial markets increases the volume of savings and investment by: maintaining low interest rates. storing large quantities of cash. providing savers with a variety of ways to lend to borrowers. offering lower interest rates than could be obtained directly from borrowers.

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter4: Managing Your Cash And Savings

Section: Chapter Questions

Problem 9FPE

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Financial markets promote economic efficiency by *A.channeling funds from investors to savers.B. creating inflation.C.causing recessions.D. channeling funds from savers to investors.
A deposit institution can offset its liquidity risk to reduce its net deposit drains by reducing its assets through all of the following methods except: a. Borrowing funds or issuing equity. b. Calling back its loans. c. Use cash reserve. d. Selling securities.
Based on your understanding of the fAactors that affect the cost of money, Identify which of the following statement is true. a. higher inflation leads to lower interest rates. b. Interest is the price paid to borrow funds. c. Higher risk leads to lower interest rates.
Keeping your funds in liquid assets is riskier than keeping them in liquid assets and therefore investors require a higher expected rate of return on liquid assets.
The house money effect is used to explain the tendency of investors to take higher risks when reinvesting profit earned than when they are investing their savings or initial capital Select one:TrueFalse
Banks improves the liquidity of the bank by a. Purchasing more assets of the bank b. Increasing the profit rates on saving accounts c. Generating additional income from investment d. By reducing the interest rates on loan
Lower rates of interest means higher levels of loans, and therefore, higher level of investment in real capital equipment. With more capital we would expect an economy to be more productive and to have higher levels or real income and economic growth. Critically analyse this statement by connecting it with the financial intermediaries and how viral they are to a well-functioning financial system.
Why do equity investors often use borrowed funds? Explain positive and negative financial leverage and the risks to the borrower of using borrowed funds.What is a real estate investment trust? Explain the difference between public and private REITs. How is performance measured for REITs? Choose three common investment ratios in real estate. Explain what the ratio measures and why an investor might consider the ratio. What is the difference between unlevered and levered cash flows? What discount rate must be applied when using unlevered cash flows versus levered cash flows? What is lease assignment? What is subletting? Explain at least one main difference between these methods.
Decreasing the amount of liquid assets held for the purpose of meeting loan demands and deposit withdrawals and increasing the usage of deposit and nondeposit sources of funds paying market rates of interest is known as: a. leverage adjustment b. liability management c. liquidity management d. liquidity adjustment
A higher level of wealth causes the demand for loanable funds to increase and interest rates to fall true or false?
Financial market offers the borrowers funds they need to a. Increasing the productivity b. Decreasing the productivity c. Decreasing the loan of the borrowers d. Increasing the assets of the borrowers
For Discounted Cash Flows to be useful, individual investors and companies must estimate a discount rate and cash flows correctly. Select one: a. True a. False

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		maintaining low interest rates.
		storing large quantities of cash.
		providing savers with a variety of ways to lend to borrowers.
		offering lower interest rates than could be obtained directly from borrowers.