Questions and Answers of Introduction Finance Markets

What is meant by bank liquidity and bank solvency?
Briefly describe the purpose of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) of 1989. Also, indicate the purpose of the Resolution Trust Corporation (RTC).
Use the data from Problem 7 for Second National Bank and calculate the common equity capital ratio assuming that stockholders’ equity was equal to common equity (i.e., there was no preferred stock).
Go to http://www.stlouisfed.org and identify sources and uses of funds for commercial banks.
What are automatic transfer service (ATS) accounts?
The following problem requires a basic knowledge about probabilities and the calculation of expected values. The problem is more easily solved using Excel spreadsheet software.a. Calculate the dollar
What is deposit money and how it is “backed”?
What is the difference between full-bodied money and token coins?
Describe how an individual’s net worth is determined.
Indicate how real assets and financial assets differ.
Following are components of the M1 money supply at the end of last year. What will be the size of the M1 money supply at the end of next year if currency grows by 10 percent, demand deposits grow by
Find several recent issues of Bloomberg Businessweek. Identify articles relating to developments in the U.S. monetary system. Also search for possible developments occurring in foreign monetary
Go to the website of the Federal Reserve Bank of St. Louis at http://www.stlouisfed.org. Go to “Research and Data” and access the Federal Reserve Economic Database (FRED). Compare the present
Describe the three basic ways whereby money is transferred from savers to business firms.
How do surplus economic units and deficit economic units differ?
Indicate some of the career opportunities in finance available to business graduates today.
How do debt securities and equity securities differ?
What are the differences between primary and secondary markets?
Briefly describe the differences between money and capital markets.
What are the four major components of an effective financial system?
Go to the U.S. Small Business Administration (SBA) website, http://www.sba.gov, and search for sources of information on starting a new business. Identify and prepare a written summary of the
Financial markets may be categorized as (1) debt securities markets, (2) equity securities markets, (3) derivative securities markets, and (4) foreign exchange markets. Indicate in which of these
What is meant by the term financial environment?
The U.S. financial system is composed of (1) policy makers, (2) a monetary system, (3) financial institutions, and (4) financial markets. Indicate which of these components is associated with each of
What is finance?
Match the following dates with the associated events.Year Eventa. 2000.......................(1) Great
Explain the process for using forward contracts when comparing home currency investments and overseas investments over a given time period.
If your belief about future exchange rates diff er from those quoted as forward rates, how can you attempt to profit from this difference in expectations?
Why is hedging similar to buying insurance?
The current U.S. one-month interest rate is 5 percent compared to 7 percent in Europe. Today’s spot rate between the euro and dollar is $1.18/€, and today’s one-month forward rate is $1.25/€.
The current U.S. one-month forward rate is $1.25/€. You are an American speculator with $40,000. You are sure the spot rate will be $1.32/€ one month from today. What steps should you take today
A U.S.-based multinational corporation (MNC) purchased equipment from a British firm today and must pay them £1,000,000 one month from today. The MNC is certain the spot rate will be $1.10/£ one
A U.S.-based multinational corporation (MNC) sold some equipment to a British firm today and will receive £1,000,000 from the British firm one month from today. Today’s spot rate is $1.12/£. The
Identify the various sources of revenues in the federal budget.
Define personal saving.
Also, differentiate between voluntary and contractual savings.
What are the two types of financial market securities?

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