Compare and contrast direct finance and indirect finance.
Compare and contrast direct finance and indirect finance. Which is more likely to have a larger share of the total financial market in a mature economy? In a young economy? Why? What is the relationship between the efficiency of a financial system and the rate of economic growth? Describe the major types of risks to financial securities, and give a specific example of each. How do investors measure risk? What is liquidity, and why do investors care about it?Why is the interest rate on a credit card usually higher than the interest rate on an automobile loan? Why is the interest rate on a security sold by a city government usually less than the interest rate on a security sold by a corporation if both have comparable default risk? During recessions, do expected real interest rates increase or decrease? Explain why. What are the major forces acting on expected real interest rates in recessions? Describe two ways the government could eliminate the interaction of inflation with the tax system.
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