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Should it be forbidden to place on the market “bad loans” as securities? Bad loans should be securitized but based on conditions. The bankers should keep the investment bank/ investors aware of the risk involved in the securities and sell them . However, the returns on the bad loans are generally more and the investors who want to take risks can go for it. The advantage for banks are that the risk of bad debt is shared with the investor and also increasing its liquidity. Banks can also earn profits through securitization.

Which are the corporate needs satisfied by secondary capital markets?

1. Taking loans against the shares from the banks
2. Decrease in transaction costs during takeover of a company by any other company. These costs are more in-case of a family run business. 3. Price accuracy can reduce the agency costs of management, and make hostile takeover a less risky proposition and thus move capital into the hands of better managers. 4. Accurate share price aids the efficient allocation of debt finance whether debt offerings or institutional borrowing.

a. Why are closed-end funds crucial for financing SMEs?
1. Decrease risk of the existing investors
2. Raise funds for expansion of the SME

b. Why open-end funds do not constitute a feasible financing option for SMEs?

c.Private Equity Funds operate in which Allocative Channels? Indirect finance: The ultimate borrowers are normally unknown to the ultimate lenders. A lender faces less risk in indirect lending because, as a specialist in the field, the intermediary normally has a well-established credit standing.
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