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1) What does it mean to say that individuals as a group are net suppliers of funds for financial institutions? What do you think the consequences may be in financial markets if individuals consumed more of their incomes and thereby reduced supply of funds available to financial institutions?

2) You are the chief financial officer (CFO) of Gaga Enterprises, edgy fashion design firm. Your firm wants $10 million to expand production. How do you think process of raising this money would differ if you raise it with the help of the financial institution versus raising it directly in a financial markets?

3) For what types of needs do you think a firm will issue securities in the money market versus the capital market?

4) Your broker calls to offer you investment opportunity of a lifetime, the possibility to invest in mortgage-backed securities. The broker describes that these securities are entitled to the principal and interest payments received from a pool of residential mortgages. List some of the problems you will ask your broker to assess risk of this investment opportunity.

5) Reston, Inc., has asked your corporation, Pruro, Inc., for financial assistance. As a long-time customer of Reston, your firm has decided to give that assistance. problem you are debating is whether Pruro must take Reston stock with the 5% annual dividend or a promissory note paying 5% annual interest. Suppose payment is guaranteed and dollar amounts for annual interest and dividend income are identical, which option would result in greater  after-tax income for first year?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M91920

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