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Introduction to Finance 15th Edition

Markets, Investments, and Financial management

Ronald W. Melicher

Edgar A Norton

Wiley

word count 175 each questions, APA, Reference and good English and grammar, correct word count and no cover sheet, just answer question. Please use citation and reference. Reference goes after each question. No cover sheet. Must use 2 to 3 references.

1. The U.S. financial system is composed of: (1) policy makers, (2) a monetary system, (3) financial institutions, and (4) financial markets.
Indicate which of these components is associated with each of the following roles—and explain who it facilitates the activity:
a. accumulate and lend/invest savings
b. create and transfer money
c. pass laws and set fiscal and monetary policies
d. market and facilitate transfer of financial assets

2. Your boss has told you that tomorrow the Federal Drug Administration (FDA) will announce its approval of your firm’s marketing of a new breakthrough drug. As a result of this information, you are considering purchasing shares of stock in your firm this afternoon. What would you do? In addition, discuss the implications of six financial principles for this scenario.

3. A number of terms are introduced in these chapters which have implications for how we, as individuals, manage our debt and payments. Explain the differences between:
a. debit cards and credit cards—which would you prefer to use? Why?
b. money market mutual funds and CDs (certificates of deposit)—which is preferable for investing funds you may need next month? Why?
c. federal funds and Treasury bills—and explain how each are used to fund the needs of their users.

4. Go to http://www.stlouisfed.org and identify sources and funds of funds for commercial banks. (Try typing “commercial banks” in the Search box).

5. The Federal Reserve Board has decided to ease monetary conditions to counter early signs of an economic downturn. Because price inflation has been a burden in recent years, the Board is eager to avoid any action that the public might interpret as a return to inflationary conditions.
How might the Board use its various powers to accomplish the objective of monetary ease without drawing unfavorable publicity to its actions?

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Explanation & Answer

Attached.

Markets, Investments and Financial Management – Outline
I.
a. Accumulates and lend/invest savings
b. Create and transfer money
c. Pass laws and set fiscal and monetary policies
d. Market facilitate transfer of financial assets
II.
III.

Unethical behavior
Debit card and credit card
Money market mutual funds and CDs
Federal funds and treasury bills

IV.
V.

Sources of funds for Commercial banks
Federal Reserve Board and monetary ease


Running head: MARKETS, INVESTMENTS AND FINANCIAL MANAGEMENT

Markets, Investments and Financial Management
Name
Institution

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MARKETS, INVESTMENTS, AND FINANCIAL MANAGEMENT

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Markets, Investments and Financial Management
1. The U.S. financial system is composed of: (1) policy makers, (2) a monetary system, (3)
financial institutions, and (4) financial markets. Indicate which of these components is
associated with each of the following roles—and explain who it facilitates the activity:
Question 1a: Accumulates and lend/invest savings
Financial institutions accumulate, lend and invest money collected (Kapoor et al., 2015).
They are the only establishments that have the legal authority to conduct financial transactions.
These transactions include collecting deposits, giving out loans and investing money collected
from clients as deposits. Almost everyone in one way or another, deals with a financial
institution regularly (Melicher, & Norton, 2014). It is also through financial institutions that
exchanging of currency is done.
Question 1b. Create and transfer money
Financial institutions create money through deposits (White, Vanberg, & Kohler, 2015).
Account holders deposit their savings into their accounts. Financial institutions collect the money
deposited and transfer it to the investments or as loans to borrowers. The government and other
institutions also borrow this money.
Question 1c. Pass laws and set fiscal and monetary policies
Policy makers pass laws and also set fiscal and monetary policies (Kapoor et al., 2015).
Policy makers ensure that law is made in the U.S as well as making decisions regarding fiscal
and monetary policies. These policy and lawmakers include the Congress, the treasurer, the
President and the Federal Reserves Board (Melicher, & Norton, 2014).

MARKETS, INVESTMENTS, AND FINANCIAL MANAGEMENT

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Question 1d. Market facilitate transfer of fina...


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