Homework Set $1($Due on October $9,2024)$

This homework set is related to Lectures $1.$

Reading material: ME$,$ Chapters $1,2.$

Learning objectives: after studying this lecture you should be able to:

Understand the function of financial systems

Understand the differences between indirect and direct finance

Understand the basic differences of debt$/$equity$/$derivative

Understand the differences between equity and debts

Understand the function of financial intermediaries $($transaction costs, risk sharing, asymmetric information$)$

Understand the differences between adverse selection and moral hazard

Understand the function of FinTech in the financial system price

Homework questions:

$($Bond vs$.$ common stock$)$ Explain the main difference between a bond and a common stock.

$($Financial Markets$)$ What is the main function of financial markets? direct$/$indirect finance $4,10,52(1)$

$($Adverse Selection$)$ Lisa is planning to purchase a new house and is looking for a home loan that will give $58-59(1)$

her the lowest interest rate, Discuss how she can be affected by asymmetric information and adverse selection.

$($FinTech$)$ Use one example to analyze briefly how FinTech improves the efficiency of financial service. $21-28(2)$

$($Financial intermediaries$)$ How do financial intermediaries solve the problem of adverse selection? $52-63(1)$