金融英语第二版陶艳珍课后参考答案

TestYourself=1\*ROMANIMultiplechoice.B2.D3.D4.D5.AA7.C8.D9.A10.B=2\*ROMANIIDefinebrieflythefollowingtermsandconcepts.1.Tradinggoodsforgoodsinanexchangeeconomy.2.Somethingthatisgenerallyacceptedandusedtomakepayments.3.Somethingthatretainsitsvalueovertime.4.Astandardizedaccountingunit,suchasthedollar,whichisthestandardmeasureofvalue.5.Creditmoneyisakindofcreditcertificatethatservesasmeansofexchangeandmeansofpaymentincirculationanddoesnotconsistoforrepresentaspecificvaluablecommodity.6.Monetarysystemisthestructure,systemandorganizationinmoneycirculationsetbylawofacountry.=3\*ROMANIIITranslatethefollowingsentencesintoChinese.尽管每个人可以按照自己的意愿增加货币持有（在他或她的财富约束内），总的货币供给却不是由个人控制，而是由一国央行控制的，这是货币重要而又有趣的一面。人们在长期的生产中发现，如果各具特长的人们从事最适合他们的工作并与其他人交换他们所生产的产品和劳务，他们将会得到最大的满足，社会效率也将最大化。信用货币的价值取决于其普遍接受性，而这基于发行者的信用及信用创造过程。如果人们倾向于强调货币的储藏功能而不是交易媒介功能，那么广义货币口径更适合。一次世界大战后，不再有国家能够恢复到金币本位制，取而代之的是金块本位制和金汇兑本位制。一些经济学家称其为不完美的金本位制。=4\*ROMANIVTranslatethefollowingsentencesintoEnglish.1.Therearetwotypesofcommodityexchange:oneisbarterandtheotherisindirectexchangethroughmedium.2.Themainfunctionsofmoneyincludemediumofexchange,meansofpayment,storeofvalueandunitofaccount.3.Themonetarysysteminmostcountrieshavepassedthestagesofthesilversystem,thebimetallicsystem,thegoldsystemandthecreditmoneysystem.4.Comparedwithbarter,indirectexchangethroughmoneyreducestransactioncostandraisestheefficiencyofexchange,whichgreatlypromotethedevelopmentofcommodityeconomy.5.Historically,moneycanbedividedintocommoditymoney,representativefull-bodiedmoney,creditmoney,electronicmoney,etc.=5\*ROMANVAnalyticalquestions.1.a.Eventhoughitisscarceanddurable,goldwouldnotbegood“money”becauseitistooheavytocarryaroundtobeconvenientlyusedasameansofpayment.b.Dirtwouldnotbegood“money”becauseitisnotscarce.c.Cornwouldnotbegood“money”becauseitisnotscarceandcanbeeasilyreproduced.Also,afterawhilecornrots,soitwouldnotserveasagoodstoreofvalue.d.Eventhoughitisscarce,oilwouldnotbegood“money”becauseitwouldbeinconvenienttocarryaroundasameansofpayment.2.Moneyreducestransactioncostandpromotestheefficientgrowthofmarketeconomy.Withemergenceofmoney,thelimitof“doublecoincidenceofwants”existsnomore.Moneysavestradersmuchtimeandresourcesneededforfindingtradepartnersandobtainingmarketinformation.consequentlymoregoodsandservicescanbeturnedoutwiththeuseofresourcesandtimesaved.Besides,moneybringsaboutthegeneralizationofthepurchasingpower,therebyresultingintheprovisionofefficientmeansformarket-basedallocationofresources.Holdingmoney,consumerscanpromotethereasonabledistributionofsocialresourcesaccordingtotheconsumersdemandthroughpurchasinggoodsorservicestheyneed.Inthissense,themarketeconomyisakindofmonetaryeconomyasmoneyguaranteesproduction,exchange,allocationandconsumptionofgoodsandservicesinaneconomy.3.Inaneconomyexistvariouskindsofmoney,notonlycurrency.Moneysupplyreferstothecollectionofallkindsofmoneyinaneconomy.Eachcountryemploysfairlystandardmeasuresofmoneythatincludethevolumeofcurrencyincirculationandthevolumeofdepositsatanypointoftime.4.A.Moneyisanythingthatfunctionsasamediumofexchange,aunitofaccount,andastoreofvalue.B.Moneyisuniqueamongfinancialassetsbecauseitisacceptableasameansofpayment(mediumofexchange).Aunitofaccountisastandardizedaccountingunitsuchasthedollarthatprovidesaconsistmeasureofvalue.Astoreofvalueretainsitsvalueovertime.C.Moneyeliminatestheneedofadoublecoincidenceofwantsinabartereconomy.D.Moneywillspontaneouslydevelopinanexchangeeconomybecauseitreducesthetransactionscostsofmakingexchanges.5.1)Acommoditythatbecomesamediumofexchangeiscalledacommoditymoneyormoneyinkind,whenitsvalueinthenon-moneyuseisequaltoitsvalueasmoney.Itistheoldestmoney,mainlyusedinabartereconomy.2)Papermoneythatatteststoanownershipclaimonacommoditysuchasgoldorsilverisreferredtoasrepresentativefull-bodiedmoney.3)Creditmoneyisakindofcreditcertificatethatservesasmeansofexchangeandmeansofpaymentincirculationanddoesnotconsistoforrepresentaspecificvaluablecommodity.4)ElectronicMoneyreferstodepositorymoneythatisstoredandprocessedthroughcomputersystemorelectronicpaymentsystem.6.Monetarysystemisthestructure,systemandorganizationinmoneycirculationsetbylawofacountry.Accordingtothemoneymaterialsafterwhichthemonetarysystemwasandisnamed,themonetarysysteminmostcountrieshavepassedthestagesofthesilversystem,thebimetallicsystem,thegoldsystemandthecreditmoneysystem.Themaincontentsofourmonetarysystemareasfollows:First,Renminbiisthelegaltender.Yuanisitsunit.Renminbihasnorelationwithgold,noranyforeigncurrencies.It’sconvertiblecreditmoneyundercertainconditions;Second,RenminbiisthesolelegalmoneyinChina.Third,theissuanceofRenminbiishighlyconcentratedandthePeople’sBankofChinaholdstherightofissuanceofRenminbi.TheissuanceofRenminbiisbackedbythegoodsandmaterialsheldbythegovernment.Renminbiisissuedthroughthechannelofpurchasinggold,silver,foreignexchangeandgrantingloansbythePBC.Goldandforeignexchangeareusedasthereservesforinternationalpayments.TestYourself=1\*ROMANIMultiplechoice.A2.B3.D4.D5.BA7.C8.A9.A10.A=2\*ROMANIIDefinebrieflythefollowingtermsandconcepts.1.Creditineconomicsreferstoabehaviorofborrowingandlendingwiththefeatureofrepaymentoftheprincipalplusinterestsandisaspecialformofmovementofvalue.2.Commercialcreditisthecreditthatisprovidedmutuallybetweenenterprisesandislinkeddirectlytoexchangeofgoods.3.Inbroadsense,bankcreditisthecreditthatisgrantedbybanksandotherfinancialinstitutions.Innarrowsensebankcreditonlyreferstothecreditprovidedbybanks.4.Publiccredit,alsocalledfiscalcreditisthecreditthatisextendedtothepublicsector,whichincludesgovernmentunitsatalllevelsrangingfromlocalandnationaltointernational.5.ConsumercreditConsumercreditorconsumptioncreditisthecreditthatbusinesses,banksandotherfinancialinstitutionsgranttoconsumersformeetingconsumers’demandforconsumergoods.6.Privatecreditisthecreditgrantedmutuallybetweenindividualsintheformofmoneyorgoods.Suchkindofcreditismostlyconnectedwithunderdevelopedordevelopingareasandcountries,evenintheremoteareasinthedevelopedcountries.=3\*ROMANIIITranslatethefollowingsentencesintoChinese.信用在经济学意义上指的是以偿还本金和利息为特点的借贷行为，它是价值运动的一种特殊形式。此外，信用也为提供和创造交换媒介与支付手段发挥了作用。银行不仅可以根据资金来源进行资金运用，而且可以通过资金运用创造资金来源，即通过贷款创造货币。基于贷款偿还安排，消费贷款可以分为到期一次性偿还贷款与分期偿还贷款。民间信用具有借贷时自发、分散及盲目的特点，因此政府金融部门很难去标准化并监管民间信用。=4\*ROMANIVTranslatethefollowingsentencesintoEnglish.1.Bankcreditisanintermediatecredit,asbanksandotherfinancialinstitutionsareintermediariesbetweentheownersandusersofmonetarycapitalincreditactivities2.Bankcreditovercomesthelimitationsofcommercialcreditregardingthesize,direction,andtimeofthecredit.3.Asenterprisesthattakeindepositsandgrantloans,bankcannotonlyprovidecredit,butalsocreatecreditandthengrantcredit.4.Consumercreditcanraiseconsumers’currentlivingstandardsbothmateriallyandculturally.5.Privatecreditisthecreditgrantedmutuallybetweenindividualsintheformofmoneyorgoods.=5\*ROMANVAnalyticalquestions.1.Comparedwithcommercialcredit,bankcredithasthefollowingadvantages:1)Bankcreditovercomesthelimitationsofcommercialcreditregardingthesize,direction,andtimeofthecredit.2)Asenterprisesthattakeindepositsandgrantloans,bankcannotonlyprovidecredit,butalsocreatecreditandthengrantcreditatlowcost.Becauseofthefeaturesmentionedabove,bankcredithasbecomethemajorformofmoderncreditbothinChinaandinmostwesterncountries.Butbankcreditcannottotallyreplacecommercialcredit.Commercialcreditstillisthebasisofbankcredit.Besides,commercialcreditservesdirectlytheturnoveroftheindustrialcapitalandthemovementofcommoditiesfromproductiontocirculation.Socommercialcreditismoreconvenient.Ifcommercialcreditcansolvethedifficultiesoffundsshortage,economicentitieswillfirstusecommercialcredit,notbankcredit,tomeetthedemandforcapital.Whatismore,someofthebankassetsbusiness,suchasdiscountofbill,areconductedonthebasisofcommercialcredit.2.Consumercreditplaysanimportantroleineconomy,whichcanbeeasilyseenfromthefollowing:1)Consumercreditcanraiseconsumers’currentlivingstandardsbothmateriallyandculturally.2)Undertherightconditions,consumercreditcanbeusedtopromotetheproductionandsaleofconsumergoods,therebyfurtherstimulatetheeconomicgrowth.3)Consumercreditcanbeusedtofacilitatetheapplicationofnewtechnology,thesaleandrenewalofnewproducts.Therolesofconsumercreditinthisaspectcannotbeunderestimated.4)Consumercreditcanbeusedtoregulatemarketsupplyanddemand.Whenthereisexcesssupplyofgoodsandinsufficientdemand,consumercreditshouldbeincreasedinsize.Conversely,whenthereisexcessdemandoversupply,consumercreditshouldbecutdownsothatsocialpurchasingpowercanbedecreased.3.Moneyisanythingthatfunctionsasamediumofexchange,aunitofaccount,andastoreofvalue.Creditineconomicsreferstoabehaviorofborrowingandlendingwiththefeatureofrepaymentoftheprincipalplusinterestsandisaspecialformofmovementofvalue.Creditneednotnecessarilybebasedonformalmonetarysystems.Thecreditconceptcanbeappliedinbartereconomiesbasedonthedirectexchangeofgoodsandservices,TestYourself=1\*ROMANIMultiplechoice.D2.C3.C4.A5.BA7.D8.D9.C10.B=2\*ROMANIIDefinebrieflythefollowingtermsandconcepts.1.Interestisafee,paidonborrowedcapital.Thefeeiscompensationtothelenderforforegoingotherusefulinvestmentsthatcouldhavebeenmadewiththeloanedmoney.2.Theinterestrateisthepercentageoftheprincipalthatispaidasafee(theinterest),overacertainperiodoftime,whichisthecostandbasicpriceofborrowedcapitalthatequatesthedemandforandsupplyoffundsinthefinancialmarkets.3.Compoundingisamethodusedtofindoutthefuturevalueofapresentsum-thatis,whatisthefuturevalueofmoneylent(orborrowed)today.4.Discountingisthemethodusedtofigureoutwhatthepresentvalueofmoneyistobereceived(orpaid)inthefuture.5.Thetermstructureofinterestratesistherelationshipbetweenmaturity(ortime)andreturnatagivenpointoftime.6.Theriskstructureofinterestrateistherelationshipamonginterestratesonsecuritiesthathavethesametermtomaturitybuthavedifferentinterestrates.=3\*ROMANIIITranslatethefollowingsentencesintoChinese.实际利率是经过货币购买力或预期通货膨胀修正后的名义回报率。浮动利率在整个融资期间不固定，而是根据市场利率的变化不时进行调整。优惠利率是指享有优惠条件的利率，其存款利率比一般存款利率高，贷款利率则比一般贷款利率低。基准利率引导并影响其他利率水平。市场利率指在某一时点完全由金融市场上资金的供给和需求所决定的利率。=4\*ROMANIVTranslatethefollowingsentencesintoEnglish.1.Theinterestrateisthereturnonlendingtoady(spendinginthefuture)andthecostofborrowingtoday(repayinginthefuture).2.Compoundinganswersthisquestion:whatisthefuturevalueofmoneylenttoday?3.Theyieldcurveisagraphicalrepresentationoftherelationshipbetweeninterestrates(yields)onaparticularsecurityanditstermtomaturity.4.Becauseinvestorsareriskaverse,theymustbeofferedthebonusofextrainteresttoacceptmorerisk.5.Theextrareturnorinterestiscalledariskpremium,anditssizeincreaseswiththeriskinessoftheborrower.=5\*ROMANVAnalyticalquestions.1.Realinterestrateisthenominalrateyouearncorrectedforthechangeinthepurchasingpowerofmoneyorfortheexpectedinflation.2.Discountingisthemethodtocalculatethepresentvalueofmoneytobereceived(orpaid)inthefuture.Theconceptofpresentvalueisusefulbecauseitisoftenusedtocomparereturnsorcostsindailyeconomiclife.3.Ayieldcurvecanbenegativelyslopedwhentheyielddeclinesasthetermtomaturityincreases.Inthiscase,interestratesaregenerallyabnormallyhighandshort-terminterestratesareexpectedtodeclineinthefuture.4.Accordingtotheexpectationstheory,thelongterminterestrateisthegeometricaverageofthecurrentshort-termrateandtheexpectedfutureshort-termrateexpectedtoprevailoverthetermtomaturityofthelongertermsecurity.Thegeometricaverageisusedinsteadofthesimplerarithmeticaverageinordertotakeaccountoftheeffectsofcompounding.5.Termtomaturity,creditrisk,andtaxtreatmentarealldeterminantsoftheinterestrateonaparticularasset.Ifcreditrisk,interestrates,ortaxtreatmentchange,theyieldcurveshifts.TestYourself=1\*ROMANIMultiplechoice.A2.A3.A4.B5.BD7.D8.A9.C10.B=2\*ROMANIIDefinebrieflythefollowingtermsandconcepts.1.Foreignexchange,orforex,isforeignmoney.Allforeigncurrency,consistingoffundsheldwithbanksabroad,orbillsorcheques,againinforeigncurrencyandpayableabroad,aretermedforeignexchange.2.Afixedexchange-ratesystem(alsoknownaspeggedexchangeratesystem)isacurrencysysteminwhichgovernmentstrytokeepthevalueoftheircurrenciesconstantagainstoneanother.3.Afloatingexchangerateoraflexibleexchangerateisatypeofexchangerateregimewhereinacurrency'svalueisallowedtofluctuateaccordingtotheforeignexchangemarket.4.Spottransactionsinvolvetoday’spricesofcurrencyanddeliveryofthecurrencywithintwobusinessdays.5.Forwardtransactionreferstothatabuyerandselleragreeonapriceforanydateinthefutureandthetransactionoccursonthatdate,regardlessofwhatthemarketratesarethen.Thedatecanbeafewdays,monthsoryearsinthefuture.6.Interestrateparityisannon-arbitrageconditionwhichsaysthatthereturnsfromborrowinginonecurrency,exchangingthatcurrencyforanothercurrencyandinvestingininterest-bearinginstrumentsofthesecondcurrency,whilesimultaneouslypurchasingfuturescontractstoconvertthecurrencybackattheendoftheinvestmentperiod,shouldbeequaltothereturnsfrompurchasingandholdingsimilarinterest-bearinginstrumentsofthefirstcurrency.Ifthereturnsaredifferent,investorscouldtheoreticallyarbitrageandmakerisk-freereturns.=3\*ROMANIIITranslatethefollowingsentencesintoChinese.汇率报价按1个单位货币（也被称为基准货币）可以买到的若干数量的计价货币或报价货币表示。银行同业市场内，买卖价之间的点差非常小并且不被业内以外的交易者知悉。汇率波动会实际提高或降低价格，对于公司和个人来说，可能是对财务计划的一次严峻考验。购买力平价理论基于使两国货币购买力相等的长期均衡汇率。与购买力平价理论相似，国际收支模型主要强调贸易商品和劳务，忽视了国际资本流动日益重要的作用。=4\*ROMANIVTranslatethefollowingsentencesintoEnglish.1.Theexchangerateisaprice—thepriceofonenationalcurrencyintermsofanother—andisdeterminedbysupplyanddemand.2.ThedemandfordollarsintheforeignexchangemarketreflectsthedemandbyforeignresidentsforU.S.goods,services,andfinancialclaims.3.ThesupplyofdollarscomesfromthedemandbyU.S.residentsforforeigngoods,services,andfinancialclaims.4.Adepreciationofthedollarcanresultfromoneormoreofthefollowing:afallinU.S.interestratesrelativetoforeigninterestrates,ariseinU.S.income,afallinforeignincome,and/ormoreinflationintheUnitedStatesthanabroad.5.Thepurchasingpowerparitytheoryisbasedontheassumptionthatgoodsareidenticalandtradable,andthattherearenotransportationcostsorbarrierstotrade.=5\*ROMANVAnalyticalquestions.1.Quotesusingacountry'shomecurrencyasthepricecurrency(e.g.,EUR1.00=$1.58intheUS)areknownasdirectquotationorpricequotation(fromthatcountry'sperspective)andareusedbymostcountries.Quotesusingacountry'shomecurrencyastheunitcurrency(e.g.,$0.97AUD=$1.00US)areknownasindirectquotationorquantityquotationandareusedinBritishnewspapersandarealsocommoninAustralia,NewZealandandtheEuro-zone.Directquotation:1foreigncurrencyunit=xhomecurrencyunitsIndirectquotation:1homecurrencyunit=xforeigncurrencyunitsNotethat,usingdirectquotation,ifthehomecurrencyisstrengthening(i.e.,appreciating,orbecomingmorevaluable)thentheexchangeratenumberdecreases.Converselyiftheforeigncurrencyisstrengthening,theexchangeratenumberincreasesandthehomecurrencyisdepreciating.2.Theforeignexchangemarketisuniquebecauseof1)itshugetradingvolumerepresentingthelargestassetclassintheworldleadingtohighliquidity;2)itsgeographicaldispersion;3)itscontinuousoperation:24hoursadayexceptweekends,i.e.tradingfrom20:15GMTonSundayuntil22:00GMTFriday;4)thevarietyoffactorsthataffectexchangerates;5)thelowmarginsofrelativeprofitcomparedwithothermarketsoffixedincome;6)theuseofleveragetoenhanceprofitandlossmarginsandwithrespecttoaccountsize.Assuch,ithasbeenreferredtoasthemarketclosesttotheidealofperfectcompetition,notwithstandingcurrencyinterventionbycentralbanks.3.Futuresareforwardtransactionswithstandardcontractsizesandmaturitydates—forexample,500,000BritishpoundsfornextNovemberatanagreedrate.Thesecontractsaretradedonaseparateexchangesetupforthatpurpose.4.1)Thepurchasingpowerparity(PPP)theoryusesthelong-termequilibriumexchangerateoftwocurrenciestoequalizetheirpurchasingpower.DevelopedbyGustavCasselin1920,itisbasedonthelawofoneprice:thetheorythat,inanideallyefficientmarket,identicalgoodsshouldhaveonlyoneprice.2)Interestrateparityisannon-arbitrageconditionwhichsaysthatthereturnsfromborrowinginonecurrency,exchangingthatcurrencyforanothercurrencyandinvestingininterest-bearinginstrumentsofthesecondcurrency,whilesimultaneouslypurchasingfuturescontractstoconvertthecurrencybackattheendoftheinvestmentperiod,shouldbeequaltothereturnsfrompurchasingandholdingsimilarinterest-bearinginstrumentsofthefirstcurrency.Ifthereturnsaredifferent,investorscouldtheoreticallyarbitrageandmakerisk-freereturns.3)BalanceofPaymentsModelholdsthataforeignexchangeratemustbeatitsequilibriumlevel—theratewhichproducesastablecurrentaccountbalance.4)Theassetmarketapproachviewscurrenciesasassetpricestradedinanefficientfinancialmarket.Consequently,currenciesareincreasinglydemonstratingastrongcorrelationwithothermarkets,particularlyequities.TestYourselfIMultiplechoice1.D2.A3.B4.C5.B6.C7.D8.C9.A10.C=2\*ROMANIIDefinebrieflythefollowingtermsandconcepts.Moneymarketsexisttotransferfundsfromindividuals,corporations,andgovernmentunitswithshort-termexcessfunds(suppliesoffunds)toeconomicagentswhohaveshort-termneedsforfunds(usersoffunds).Specifically,inmoneymarkets,short-termdebtinstruments(thosewithanoriginalmaturityofoneyearorless)areissuedbyeconomicunitsthatrequireshort-termfundsandarepurchasedbyeconomicunitsthathaveexcessshort-termfunds.Acapitalmarketisa\o"Market"marketfor\o"Security(finance)"securities(\o"Debt"debtor\o"Equity(finance)"equity),wherebusinessenterprises(\o"Corporation"companies)and\o"Government"governmentscanraiselong-termfunds.Itisdefinedasamarketinwhichmoneyisprovidedforperiodslongerthanayear.Stockandbondmarketsaretwomajorcapitalmarkets.Aforwardcontractisaparticularsimplederivative.Forwardcontractsareagreementsbytwopartiestoengageinafinancialtransactionatafuturepointintime.Forwardcontractsarepersonalizedbetweenparties(i.e.,deliverytimeandamountaredeterminedbetweensellerandcustomer).Futurecontractcanbedefinedasastandardizedfuturecontract,tradedinfuturesexchange,stipulatingthepartiestobuyorsellacertainunderlyingitematacertaindateandasetpriceinthefuture.Thefuturedateiscalledthedeliverydateorfinalsettlementday.Thepriceofunderlyingitemsonthedeliverydateiscalledthesettlementprice.Optionsarecontractsthatgivethepurchasertherighttobuyorselltheunderlyingfinancialinstrumentataspecifiedpricewithinaspecificperiodoftime.Theselleroftheoptionisobligatedtobuyorsellthefinancialinstrumenttothepurchaseriftheowneroftheoptionexercisestherighttosellorbuy.Thebasicideainaswapcontractisthatthecounterpartiesagreetoswaptwodifferenttypesofpayments.Eachpaymentiscalculatedbyapplyingaspecificinterestrate,index,exchangerate,orthepriceofanunderlyingcommodityorassettoanotionalprincipal.Theprincipalisconsiderednotionalbecausetheswapgenerallydoesnotrequirethetransferorexchangeofprincipal(exceptforsomeforeigncurrencyswap).=3\*ROMANIIITranslatethefollowingsentencesintoChinese.在直接融资中，借方在金融市场上向贷方出售证券（也称作金融工具）直接向贷方借取资金，这些证券形成对借方未来收入或资产的要求权。金融工具是双方或多方签订的具有法律约束力的协议，协议中标明交易金额、到期时间和金融交易的价格。金融市场是资金盈余者向资金短缺者转移资金的市场。在金融市场上一方通过购买另一方之前持有的金融资产转移资金。投资者从股票投资中获取收益的方式有两种：股票随时间而上涨或是公司向股东发放红利，通常投资者同时以这两种方式获取收益。金融市场的“衍生”术语是指其价值是从其它基础性资产、工具或合约中演化而来的工具或合约。最近发展最快的衍生产品包括金融远期、期货、期权和互换。=4\*ROMANIVTranslatethefollowingsentencesintoEnglish.1.Financialmarketisthemarketinwhichfundsaretransferredfrompeoplewhohaveanexcessofavailablefundstopeoplewhohaveashortage.2.Well-functioningfinancialmarketsalsodirectlyimprovethewell-beingofconsumersbyallowingthemtotimetheirpurchasesbetter.3.Secondarymarketscanbeorganizedintwoways.Oneistoorganizeexchanges,theothermethodoforganizingasecondarymarketistohaveanover-the-countermarket.4.Themoneymarketisafinancialmarketwhichonlyshort-termdebtinstrumentsaretraded;thecapitalmarketisthemarketinwhichlonger-termdebtandequityinstrumentsaretraded.5.Animportantfinancialinstitutionthatassistsintheinitialsaleofsecuritiesintheprimarymarketistheinvestmentbank,itdoesthisbyunderwritingsecurities.=5\*ROMANVAnalyticalquestions.1.Financialmarketisthemarketinwhichfundsaretransferredfrompeoplewhohaveanexcessofavailablefundstopeoplewhohaveashortage.Onepartytransfersfundsinfinancialmarketsbypurchasingfinancialassetspreviouslyheldbyanotherparty.TheElementsoffinancialmarketinclude：theparticipantsoffinancialmarket,financialinstruments,thepricesoffinancialinstruments,thetradingmechanismsoffinancialmarket.2.Thisstatementisfalse.Pricesinsecondarymarketsdeterminethepricesthatfirmsissuingsecuritiesreceiveinprimarymarkets.Inaddition,secondarymarketsmakesecuritiesmoreliquidandthuseasiertosellintheprimarymarkets.Therefore,secondarymarketsare,ifanything,moreimportantthanprimarymarkets.3.Thefallofstockpricewillinhibitthebusiness’sfurtherfinancingintheprimarymarketandthushaveanadverseimpactoninvestment.4.Forwardcontractsarenegotiatedbetweentwopartiesand,therefore,canhaveuniquespecificationsthatdependonthedemandsofthoseparties.Becausetheyarecustomized,forwardcontractsareverydifficulttoreselltosomeoneelse.Forwardcontracts,ontheotherhand,tendtobeusedwhenthecreditratingofthecontractingpartiesishighandeasytoverify.Bycontrast,futurescontractsarestandardizedcontractsthataretradedonexchanges.Theexchangespecifiestheexactcommodity,thecontractsize,andwhereandwhendeliverywillbemade.Itis,therefore,easyforpartiestoafuturescontracttoterminatetheirpositionsbeforethespecifieddeliverydate.Becauseoftheircarefulprocedurestoprotectagainsttheriskofcontractdefaultbyrequiringthepostingofmargin,futuresmarketsareusedbyindividualsandfirmswhosecreditratingsmaybecostlytocheck..5.Theadvantageofforwardcontractsisthattheycanbeasflexibleasthepartiesinvolvedwantthemtobe.However,forwardcontractssufferfromtwoproblemsthatseverelylimittheirusefulness.Thefirstisthatitmaybeveryhardforaninstitutiontofindanotherpartytomakethecontractwith.Thesecondisthatforwardcontractsaresubjecttodefaultrisk,whichmeansthatpartiestothesecontractsmustcheckeachotherouttobesurethatthecounterpartyisbothfinanciallysoundandlikelytobehonestandliveuptoitscontractualobligations.TestYourselfIMultiplechoice1.A2.D3.B4.C5.D6.C7.B8.D9.B10.B=2\*ROMANIIDefinebrieflythefollowingtermsandconcepts.Infinancialmarkets,onepartyoftendoesnotknowenoughabouttheotherpartytomakeaccuratedecisions.Thisinequalityiscalledasymmetricinformation.Lackofinformationcreatesproblems:adverseselectionandmoralhazard.Adverseselectionistheproblemcreatedbyasymmetricinformationbeforethetransactionoccurs.Adverseselectioninfinancialmarketoccurswhenthepotentialborrowerswhoarethemostlikelytoproduceanundesirable(adverse)outcome—thebadcreditrisks—aretheoneswhomostactivelyseekoutaloanandarethusmostlikelytobeselected.Moralhazardistheproblemcreatedbyasymmetricinformationafterthetransactionoccurs.Moralhazardinfinancialmarketsistherisk(hazard)thattheborrowermightengageinactivitiesthatareundesirable(immoral)fromthelender’spointofviewbecausetheymakeitlesslikelythatloanwillbepaidback.Financialinstitutionscreateandsellassetswithriskcharacteristicsthatpeoplearecomfortablewith,andtheinstitutionsthenusethefundstheyacquirebysellingtheseassetstopurchaseotherassetsthatmayhavefarmorerisk.Div