The following are correct statements about the composition of Financial Markets,EXCEPT:O Financial Transactions can be categorized as Direct Finance and Indirect Financetypes.OIndirect Finance occurs when a financial intermediary conducts the transactionbetween savers and borrowers.If a Commercial Bank uses money from depositors and lend the money to acorporation, that is considered Direct Finance.OIf a Corporation issues stocks and sells it to individual investors, that isconsidered Direct Finance.

To identify the correct statement about the composition of financial markets.

Answered: The following are correct statements…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: The Basic Tools Of Finance

Section: Chapter Questions

Problem 8PA

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As and example of a possible investment restriction, an insurer mah only be allowed to invest up to 20 percent of its assets in common stock. What penalty is imposed upon the insurer that invests 30 percent of available assets in common stock?A. The additional 10 percent must be disposed of by year endB. The state regulators would impose a 10 percent fine on the insurer.C. The additional 10 percent would be a nonadmitted asset.D. The additional 10 percent would only be listed at cost.
Suppose the economy of a large nation has a defense industry, a banking industry, and apharmaceutical industry. 1-unit output of defense requires 0.6 inputs of defense, 0.2 inputs ofbanking, and 0.2 inputs of pharmaceuticals. 1-unit output of banking requires 0.1 inputs ofdefense, 0.4 inputs of banking, and 0.5 inputs of pharmaceuticals. 1-unit output of pharmaceuticalsrequires 0.1 inputs of defense, 0.2 inputs of banking, and 0.2 inputs of pharmaceuticals.If the nation wants to have surpluses of 106 units of defense production, 243 units of bankingproduction, and 216 units of pharmaceutical production, find the gross production of eachindustry.
QUESTION ONE (1) Assume that an officer of ZED Bank wants to execute a transaction with the following characteristics using the risk-adjusted return on capital (RAROC) model: ▪ Probability of default (PD) = 45 basis points ▪ Loss given default (LGD) = 50% ▪ Exposure at default (EAD) = US$ 2.0 million ▪ The risk-free rate of return is 6% This is a loan to an agricultural company and the bank’s economic capital (EC) model delivers the following charge for the firm:EC of exposure = 5% of EAD, which is US$ 100,000. Assume that the bank has set a RAROC hurdle rate of 15% and this transaction has a net profit of US$ 12,000 before other adjustments. Required: Compute the bank’s risk-adjusted rate of return on the loan to an agricultural company? Now assume that the bank could also have made a loan for the same amount and net profit of US$ 12,000 before other adjustments to a chemical manufacturing firm, and that the EC = 2.5% in this case. Which loan between the two should the bank…
Explain the specific risk and market risk affecting a company or a group of companies that represent a sector of the stock market.Then, explain why airlines and machine tool manufacturers have substantial macro and market risks.
Assume that Annovo Financial and Bennovo Financial were banks with the same financial condition, except that Annovo Financial had bought fewer CDSs that provided insurance against defaults on mortgages. (Note: Assuming that the companies are almost identical isolates the impact of the one difference.) If many homeowners began to default on their mortgages, Annovo Financial's financial condition would become better/worse than Bennovo Financial's condition. If most financial institutions were like Annovo Financial, financial institutions could be less/more confident in lending to each other, and a tight credit market would be less/more likely.
4-4The federal government (1) encouraged the development of the savings and loanindustry, (2) virtually forced the S&L industry to make long-term, fixed-interest-rate mortgages, and (3) forced S&Ls to obtain most of their capital asdeposits that are withdrawable on demand. a.Would the S&Ls be better off if rates are expected to increase or to decreasein the future? b.Would the S&L industry be better off if the individual institutions sold theirmortgages to federal agencies and then collected servicing fees or if theinstitutions held the mortgages that they originated?
Naked Economics: Undressing the Dismal Science Book by Charles Wheelan The most accurate way to describe the purpose and contents of chapter 7 or "Financial Markets" of the Naked Economics textbook, according to the author, is : A) a primer on personal finance. B) about what a basic understanding of markets can tell us about personal investing. C) about how best to arrange funding to start a business. D)about how to manage your money and minimize your debt.
a) You are a senior financial analyst and have been asked to examine whether the global financial crisis and the COVID-19 affect financial and non-financial firms to the same extent? For the period beginning in 2006, plot the interest rates on threemonth nonfinancial commercial paper (FRED code: CPN3M), three-month financial commercial paper (FRED code: CPF3M) and Treasury bills (FRED code: TB3MS). Compare the evolution of these interest rates. b)Market participants, including financial institutions, fund managers and corporations, must understand monetary policy setting impacts on economic activity and business cycle. A central bank will typically implement monetary policy settings in order to achieve certain economic outcomes over a business cycle. In order to forecast future economic conditions and business activity, business managers therefore need to understand the business cycle. Briefly describe the principal monetary policy objective of the Reserve Bank of Australia and give…
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We would like you to identify a financial market and describe it using an economic approach. What are the goods exchanged? How is the supply set? How is the demand set? What are the constraints that are potentially preventing the market reaching an equilibrium? Examples of financial markets are stock markets, corporate bonds, derivatives, money market, sovereign bonds. We would then like you to reflect on how your new understanding of fundamental economic functions can apply or will apply to your professional experience. Identify a key area where you could apply this new knowledge and explain how it will help you to provide a better analysis of the economics forces at work.
8, Q4) Hey, need help with the following multi-part macroeconomics problem. Thank you in advance! In this problem, consider a simple mutual fund. Households and businesses invest in the fund by buying shares; the fund uses this money, in turn, to invest in a range of assets, including equities and bonds. If an investor wishes to divest from the fund, she can “redeem” her shares. Redeeming involves selling the shares back to the mutual fund for a price called the “net asset value” (NAV). The NAV is equal to the difference between assets and liabilities, divided by the total number of investors in the fund (similar to the shareholders’ equity discussed in this chapter). The NAV is updated at the end of each day. Thus every investor who redeems on a given day will get the same price. What does this fund’s balance sheet look like? Suppose several large investors in the mutual fund start getting nervous about market conditions and decide to redeem, all on the same day. How will these…

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