Business Finance Homework Help

Chapter 2

Financial Markets and Institutions

Self-test Questions

1. Discuss three ways capital is transferred between savers and borrowers. (1.5pts)

2. Why are efficient capital markets necessary for economic growth?

3. Describe the following terms. (5 pts)

Physical asset markets –

Financial asset markets –

Spot markets –

Futures markets –

Money markets –

Capital markets –

Primary markets –

Secondary markets –

Private markets –

Public markets –

4. Why are financial markets essential for a healthy economy and economic growth?

5. What are derivatives? How can they be used to reduce or increase risk?

6. List the major types of financial institutions, and briefly describe the primary function of each. (5pts)

7. What are the differences between the physical location exchanges and the NASDAQ stock market?

8. What is the bid-ask spread?

9. Differentiate between closely held and publicly owned corporations?

10. Discuss the three types of stock market transactions?

11. What does it mean for a market to be efficient?

12. Explain why some stock prices may be more efficient than others.

13. How does behavioral finance explain the real-world inconsistencies of the efficient market hypothesis?

you don’t have to answer all the questions correctly, the teacher will grade the assignment for just doing it. but the answers has to be related to the topic