$a.$ Define surplus unit and deficit unit $in$ the financial market. Provide $an$ example for each.

Which type $of$ financial institutions $do$ you deal with $in$ each example.

$b.$ Determine whether each $of$ the following $is$ a money market, capital market $or$ derivative

security:

$i.$ Securities that generally have the highest liquidity.

$ii.$ Securities that $do$ not have $an$ intrinsic value and their values are derived from the

performance $of$ the underlying assets.

iii. Securities that are commonly used $to$ purchase capital assets such $as$ machinery and

buildings.

$c.$ A company plans $to$ borrow $$100$ million $to$ facilitate its expansion.

$i.$ How might this company use the primary market $to$ facilitate its expansion?

$ii.$ How $do$ individuals indirectly provide the financing for this company?

iii.How might $securities$ firms facilitate this company$s$ expansion?

$d.$ What $is$ the difference between a mortgage and a mortgage$-$backed security?

$e.$ Assume that you plan $to$ purchase a new car, you don$t$ want $to$ pay $in$ full and prefer $to$

use a car loan. Which financial institution would you consider: a credit union, a pension

fund, $oran$ investment bank? Why?

$f.$ You see $an$ advertisement for a book that claims $to$ show how you can make $$1$million

with $no$ risk and with $no$ money down. Will you buy the book?

$g.$ How does the adverse selection problem help explain why you would $be$ more inclined $to$

lend money $to$ a family member rather than $to$ a stranger?