Fin 370 Week 2

Topics: Variable cost, Economics, Contribution margin Pages: 3 (775 words) Published: November 30, 2011
14-1
What are financial markets?
Financial markets are institutions and procedures that make transactions possible in financial claims (securities). Financial markets detail the price of goods and can be institutions and/ or procedures that facilitate transactions in financial claims (securities). Financial markets are important because they allocate supply of savings from economic units that have a surplus to economic units that have a deficit. What function do they perform?

Stock markets function is to provide investors with a platform to buy ownership shares of public corporations, allowing the companies to raise large amounts of cash at once. Mutual funds can purchase stocks allows the public to buy a lot of stocks at once Commodity prices are determined in the commodities futures market. Futures markets provide leverage for the traders by allowing the trader to borrow money for the purchase of the commodity. In essence a way to pay for something before it is delivered such as oil. How would an economy be worse off without them?

Economic wealth would decrease, normal business would have difficulty being funded if at all.

14-3
. Distinguish between the money and capital markets.
Money markets use short-term instruments such as banker’s acceptance, negotiable certificates of deposit and treasury bills to facilitate transactions and capital markets use long-term financial instruments such as. Long term refers to periods of maturity of one year or more.

14-4
What major benefits do corporations and investors enjoy because of the existence of organized security exchanges?

Corporation and investors enjoy the benefits of having a continuous market are price stability increased, publicizing and establishing fair security prices, and the opportunity for business to raise new capital since secondary market alleviate the process through organized security exchanges.

15-12A
(Break-even point) You are a hard-working analyst in the office of financial...
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