1. Whi ch of the following is the function of a financial market A) provide liqu

Question

1. Whi ch of the following is the function of a financial market A) provide liquidity B) risk management C) efficient allocation of money D) all of the above E) None of the above 2. Which of the following is the meaning of the function of efficient allocation of capital in the financial market? A) every company in the market can always get a lot of capital. B) investors always like to invest their money in the best company in the market C) investors tend to invest in the least risky firm in the financial market D) investors like to put their money in the highest return investment opportunity E) none of the above 3. One common reason for partnerships to convert to a corporate form of organization is that the partnership: A) faces rapidly growing capital requirements B) wishes to avoid taxation of profits. C) has issued all of its allotted shares. agreement expires after ten years of use. none of the above D) E) Which of the following is the advantage of a corporation A) double taxation B) unlimited liability C) profit is taxed twice D) Owners are the managers E) None of the above 4. Which of the following statements best distinguishes the difference between real and financial assets? A) Real assets have more value than financial assets. B) Real assets are tangible; financial assets are not. 5. C) Financial assets represent the voting power on real assets. D) Financial assets claim to cash flows that are generated by real assets. E) None of the above Please use the following information for questions 6 to 8 You have borrowed a loan of $20,000 from a bank to buy a car from Chase at the interest rate of 7.5% each year. You have promised the Chase to make mortgage style payments 6. If you want to borrow this loan for three years, what is the principal payment in year one? A) $6,191

Explanation / Answer

1)Answer: D) ALL OF THE ABOVE:-

Provide Liquidity: The liquidity access plays an important role in functioning of financial market as market needs price to buy and sell the securities and assets to run the stock function. Liquidity is the important element as financial instrument for mobilizing and transit of any goods and services.

Risk Management: Without risk management no financial market can be enforced to investments. Profits are expected to be inherent in the financial market which fluctuates according to the economic risk involvement. The interest rate and leverage derivatives are important debt instrument of risk to cries the credit and liquidity risk to highlight the stock markets and investments.

Efficient allocation of funds : To efficient allocation of funds and capital is important to measure the actual cost of the product to derive the efficient interest rates of the financial services and institutions. The proper allocation of funds is the main resource of profits for the economy. The demand and supply curve determined by the proper mechanism of funds to mobilize the debt-equity market.

2 b)The meaning of the function of efficient allocation of capital in the financial markets is “ investors always like to invest their money in the best company in the market” because the investor expect the better profits and returns from their investments. Investors always have a mind set to gain the desired earning from their savings with low risk.

                               

3 A) faces rapidly growing capital requirements: by providing capital solutions and growth offers to reduce the capital tensions among the partners. It also increase the liquidity position of the company. It develops the shareholders interests and business strategies which extends the long term opportunities and fulfill the shareholders needs. It establish the long term partnership with optimum capital solutions.

4 D) “Owners are the managers” is the advantage of a corporation because they the ultimate investors in the corporation. Owners are the managers are associated with partnership or sole proprietorship firms because it is easy to access the information to know the company status. They should have all rights to know the risks and returns involved in their corporation to make future investments. Owners are the responsible persons to answer the shareholders or employees about financial performances and company position.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

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