Question

For each statement, state whether you believe the statement is true or false. Provide a brief explanation of your reasoning.

a) The commercial paper market in the US has consistently grown every year between 1980 and 2013.

b) If a person uses a brokerage account to buy shares of stock (e.g. Amazon, Facebook, etc.) it is direct finance.

c) If a person uses a brokerage account to buy shares of mutual fund that invests in stocks (e.g. Amazon, Facebook, etc.) it is direct finance.

d) Financial intermediaries like banks increase the transactions costs for their customers (i.e. depositors or savers).

Answer 1

a) The commercial paper market in the US has consistently grown every year between 1980 and 2013: FALSE (It shrank to the smallest in this time)

b) If a person uses a brokerage account to buy shares of stock (e.g. Amazon, Facebook, etc.) it is direct finance: TRUE

c) If a person uses a brokerage account to buy shares of mutual fund that invests in stocks (e.g. Amazon, Facebook, etc.) it is direct finance: FALSE (It is indirect finance done through broker)

d) Financial intermediaries like banks increase the transactions costs for their customers (i.e. depositors or savers): TRUE (in the form of interest)