Finance 3270 Exam 1 Questions With Complete Solutions

Finance 3270 Exam 1 Questions With
Complete Solutions


/. Financial markets - Answer-✅Financial markets are structures through which funds
flow

/.Primary Market - Answer-✅-Markets in which users of funds (e.g., corporations) raise
funds through new issues of financial instruments, such as stocks and bonds
-Include issues of equity by firms initially going public, referred to as initial public
offerings (IPOs)

/.Secondary Markets - Answer-✅Markets that trade financial instruments once they are
issued

/.Money Market - Answer-✅Money markets trade debt securities or instruments with
maturities of one year or less

/.Capital Markets - Answer-✅-Capital markets trade debt (bonds) and equity (stocks)
instruments with maturities of more than one year
-Wider price fluctuations than money market instruments

/.primary vs secondary markets - Answer-✅

/.Forex Market - Answer-✅Foreign exchange risk is the sensitivity of the value of cash
flows on foreign investments to changes in the foreign currency's price in terms of
dollars

/.Financial Institution's - Answer-✅Financial institutions perform the essential function of
channeling funds from those with surplus funds to those with shortages of funds

/.Roles of Financial Institutions - Answer-✅-Information Costs
-Liquidity and Price Risk
-Payment Services
-Credit Allocation
-Intergenerational Wealth Transfer
-Money Supply Transformation

/.Benefits Financial Institutions provide to suppliers of funds - Answer-✅-Reduced
transaction cost
-Maturity intermediation