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Questions and Answers
In a world without financial institutions, what are the two basic choices households have for their excess savings?
In a world without financial institutions, what are the two basic choices households have for their excess savings?
- Hold cash or invest in investments plans.
- Hold cash or invest in securities issued by corporations. (correct)
- Hold cash or invest in real assets.
- Hold cash or invest in excess savings.
Where can a more detailed discussion of the causes of the financial crisis be found?
Where can a more detailed discussion of the causes of the financial crisis be found?
- Appendix 1A to the chapter in the book.
- Appendix 1B to the chapter in the book’s website.
- Appendix 1A to the chapter in the book’s website. (correct)
- Appendix 1B to the chapter in the book.
What is liquidity?
What is liquidity?
- The securities issued by corporations.
- The excess savings generated by households.
- The ease of converting an asset into cash. (correct)
- The risk that the sale price of an asset will be lower than the purchase price.
What is price risk according to the text?
What is price risk according to the text?
What do corporations issue securities for?
What do corporations issue securities for?
Which of the following is a new section in Chapter 1 of the twelfth edition?
Which of the following is a new section in Chapter 1 of the twelfth edition?
Which of the following topics is covered in Chapters 12 and 13 of the twelfth edition?
Which of the following topics is covered in Chapters 12 and 13 of the twelfth edition?
Which of the following is a focus of Chapter 14 of the twelfth edition?
Which of the following is a focus of Chapter 14 of the twelfth edition?
Which of the following topics is covered in the global box features of the twelfth edition?
Which of the following topics is covered in the global box features of the twelfth edition?
Which of the following is NOT a new addition in the twelfth edition?
Which of the following is NOT a new addition in the twelfth edition?
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Study Notes
Financial Institutions and Savings
- In a world without financial institutions, households have two basic choices for their excess savings:
- Holding money in a form that can be easily converted to other forms of wealth (e.g. cash, gold)
- Directly lending to or investing in businesses or individuals
Financial Crisis
- A more detailed discussion of the causes of the financial crisis can be found elsewhere in the text
Financial Concepts
- Liquidity refers to the ease with which an asset can be converted into cash or other forms of wealth without significant loss of value
- Price risk refers to the potential for loss due to changes in an asset's value
Corporate Finance
- Corporations issue securities to raise funds for various business purposes
Textbook Edition Updates
- The twelfth edition of the textbook includes new sections, including:
- A new section in Chapter 1
- Topics covered in Chapters 12 and 13 include:
- [Insert topic]
- A focus of Chapter 14 includes:
- [Insert topic]
- Global box features cover topics such as:
- [Insert topic]
- There are no additions in the twelfth edition regarding:
- [Insert topic]
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