Financial market and Institution

1.Because corporations do not actually raise funds in the secondary markets, they are
less important to the economy than primary market.” comment.

2As long as information remains asymmetric problems of ‘adverse selection‘ and
moral hazard‘ cannot be avoided- Discuss-

3. Using a supply-and-demand analysis for bonds, show what the effect is on interest
rates when the riskness of bonds rises. Make sure to explain the derivation of the
curves.

4.Identify the cash flows available to an investor in stock I-low reliably can these cash
flows be estimated? what determines the value of a stock?

5. (a)What is law of One Price and what are its limitation?

(b) If the European central bank decides to contract the money supply to fight inflation,
what will happen to the value of US. dollar?

(0) “A country is always worse off when its currency is weak (falls in value). ” Is this
statement true,faise, or uncertain? Explain your answer-

(d)Due to increasing wealth, what woud happen to the value of the Singapore dollar if
Singaporean significantly increased their consumption of foreign goods and services
as compared to locally produced good and services?

6. What are the advantages and disadvantages of allowing foreign banks to open
branches in your own comtry? Should foreign bank be controlled?

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