ECON $351$ Homework #$1($HW$1)($Chapter $1$ Introd. to the Financial System$)$

$1)$ What is the difference between debt and equity?

$2)$ a$.$ What is the difference between the term $$financial Markets$$ and $$financial

intermediaries$?$

b$.$ Identify if the following transaction take place in a financial market or through a

financial intermediary

$1.$ a bank lending depositors' money to a local business

$2.$ you buy treasury bonds from the U$.$S Treasury

$3.$ a pension fund investing contributions in shares $($stocks$)$ of a company

$3)$ For each of the following two questions categorize the transaction described

according to:

$($a$)$ whether they occur in the primary market or in the secondary market, AND

$($b$)$ whether the financial instrument involved is a money market instrument or a

capital market instrument.

$1.$ ABC Corporation opens for business by selling initial shares of stock

to $10$ private investors. Such a transaction

$($a$)$ occur in the $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$market

$($b$)$ and the financial instrument is a $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$instrument

$2.$ The DEFOE mutual fund company buys $$100,000$ worth of three$-$

month Treasury bills from First Securities Corp of Omaha. Such a transaction

$($a$)$ occur in the $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$ market

$($b$)$ and the financial instrument is a $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$instrument