A) Provide an example of a situation where you have acted as a supplier of capit

Question

A)     Provide an example of a situation where you have acted as a supplier of capital and discuss whether this has been through a financial intermediary or a financial market.

B)      Provide an example of a situation where you have acted as a demander of capital and discuss whether this has been through a financial intermediary or a financial market.

C)      Discuss why the secondary markets are critical to firms who want to raise capital given that firms raise capital in the primary markets and not the secondary markets. To get full credit, you need to clearly explain your answer. Note that while there is more than one viable reason, you need to only address one reason – just address it well.

Explanation / Answer

Solution a)

I’m an individual and save some part of my income for some future expenses. I invest those saved money in mutual fund schemes. Therefore, I give money to the mutual fund and mutual fund further passes it to the corporate entities. This was I’m the supplier of the capital but I go by a financial intermediary that is mutual fund.

A mutual fund collects money from a large number of small investors and invest it in corporate on the behalf of those small investors.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.