FIN402

Assignment Purposes/Learning Outcomes

CLO3:Discuss implications of the efficient market hypothesis for the allocation of funds.

CLO4:Compare and contrast the role of and function of organized financial markets andfinancial intermediaries.

Attempt all Questions Maximum Marks :10

1."If bonds of different maturities are close substitutes, their interest rates are more likely to move together." Is this statement true, false, or uncertain? Explain your answer. (3Marks)

2.Suppose that increases in the money supply led to a rise in stock prices. Does this mean that when you see that the money supply has had a sharp rise in the past week, you should go out and buy stocks? Why or why not? (3Marks)

3. Describe two ways in which financial intermediaries help to lower transaction costs in an economy like Kingdom of Saudi Arabia (2Marks)

4.How can conflicts of interest make financial service firms less efficient? (2Marks)

Answers:

1.

2.

3.

4.