1.1- Explain the key roles of the financial system. Why is it so important to the broader community to have an efficient and effective financial system- To facilitate the flow of funds, provide the mechanism to settle transactions, generate and disseminate information, provide the means to transfer and manage risk and to provide ways of dealing with incentive problems.
1.4- Compare and contrast debt and equity as a source of funds for financial claims- Debt is not necessarily always good as most people may think, you could be in debt with cash in the back, which is a great thing and the more you are in debt the better off you are. Where as, debt in expenses is not a positive sign, you want to be spending as less money as possible on expenses, so therefore the lower you are in debt the better off you are. Where as with equity, it is always a positive sign. Equity is the value of shares issued by a compare and therefore is always a positive outcome.
1.10- Explain the concept of financial intermediation. How does the possibility of financial intermediation increase the efficiency of the financial system? A financial intermediary is a financial institution that connects surplus and deficit agents. The classic example of a financial intermediary is a bank that consolidates deposits and uses the funds to transform them into loans. The possibility of financial intermediation increase the efficiency of the financial system and it supplies the bank with money in which they are able to loan out to people. With this many the customer is able to buy products and therefore increase the economy.
1.13- Explain the differences between the money market and the capital markets. Which market would Holden use to finance a new vehicle assembly plant? Participants use the money market as a means for borrowing and lending in the short term, from several days to just under a year. A capital market is the part of a financial system concerned with raising