金融机构与市场答案.docVIP

CHAPTER 1 AN OVERVIEW OF FINANCIAL MARKETS AND INSTITUTIONS ANSWERS TO END-OF-CHAPTER QUESTIONS 2. Explain the economic role of brokers, dealers, and investment bankers. How does each make a profit? Brokers, dealers, and investment bankers make markets at both primary and secondary stages. Funds are raised and claims issued in primary markets with the help of investment bankers, who purchase securities from issuers at one price and sell them to the investing public at a higher price, earning the underwriter’s spread. In secondary markets brokers help bring buyers and sellers of financial claims together, charging commissions, and dealers trade claims in volume, providing liquidity and price discovery and earning the difference between ask and bid price (the bid-ask spread). 5. Explain the concept of financial intermediation. How does the possibility of financial intermediation increase the efficiency of the financial system? Financial intermediation is the process by which financial institutions mediate unmatched preferences of ultimate borrowers (DSUs) and ultimate lenders (SSUs). Financial intermediaries buy financial claims with one set of characteristics from DSUs, then issue their own liabilities with different characteristics to SSUs. Thus, financial intermediaries “transform” claims to make them more attractive to both DSUs and SSUs. This increases the amount and regularity of participation in the financial system, thus making financial markets more efficient. 6. How do financial intermediaries generate profits? Intermediaries pay SSUs less than they earn from DSUs. Operating costs absorb part of this margin. Risks taken by the intermediary are rewarded by any remaining profit. Intermediaries enjoy 3 sources of comparative advantage: Economies of scale —large volumes of similar transactions; transaction cost control—finding and negotiating direct investments less expensively; and risk management expertise—bridging the “infor