Identify three distinct ways that savings are ultimately transferred to business firms in need of cash.
Answer to relevant QuestionsExplain the term opportunity cost with respect to the cost of funds to the firm. What general criteria does an organized exchange examine to determine whether a firm’s securities can be listed on the exchange? (Specific numbers are not needed here but rather areas of investigation.) At present, 10- year Treasury bonds are yielding 4% while a 10- year corporate bond is yielding 6.8%. If the liquidity- risk premium on the corporate bond is 0.4%, what is the corporate bond’s default- risk premium? Assume the expected inflation rate to be 4 percent. If the current real rate of interest is 6 percent, what ought the nominal rate of interest to be? Why might one firm have positive cash flows and be headed for financial trouble, whereas another firm with negative cash flows could actually be in a good financial position?
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