Question

How do FIs alleviate the problem of liquidity and price risk faced by investors wishing to...

How do FIs alleviate the problem of liquidity and price risk faced by investors wishing to invest in securities of corporations

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Banks accept long term and short term term deposits and at the same time loan out amount for short term and long term. The FIs manage this by providing , loans and advances to a wide variety of securities to manage liquidity. Diversification of the loans manages liquidity better. They provide the investors with reduced price risks as it provided cash to the investors on demand . FIS provide loans to corporation and manage price of the securities by setting interst rate based on the risk of the corporation.

Best of Luck. God Bless
Please Rate Well

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1.What is liquidity risk premium? Why does it matter to investors? Do you think the liquidity...
1.What is liquidity risk premium? Why does it matter to investors? Do you think the liquidity risk premium for start-up firms will get larger or smaller as technology advances? Why?
The price that investors are willing to pay for a firm's securities can best be described...
The price that investors are willing to pay for a firm's securities can best be described by which of the following statements? a. If a company is performing poorly, investors will not buy that company's securities. b. If a company is performing well, investors will buy the company's stock at almost any price because the price of the stock should increase. c. Since the value of a company's securities depends largely on future cash flows, investors will consider the company's...
Multinational corporations are faced with continuous exposure to exchange rate risk. Each company must decide how...
Multinational corporations are faced with continuous exposure to exchange rate risk. Each company must decide how best to manage that risk. Find an article on how another multinational corporation chose to deal with its exchange rate risk. Prompt: First, briefly summarize the strategy and/or tactics the company in your article used to manage its currency risks minimum 250 words
HOW DO I ENTER THIS PROBLEM INTO EXCEL? One-year Treasury bills currently earn 4.10 percent. You...
HOW DO I ENTER THIS PROBLEM INTO EXCEL? One-year Treasury bills currently earn 4.10 percent. You expect that one year from now, 1-year Treasury bill rates will increase to 4.30 percent. The liquidity premium on 2-year securities is 0.08 percent. If the liquidity premium theory is correct, what should the current rate be on 2-year Treasury securities?
How do bond investors manage various factors related to bond price volatility?
How do bond investors manage various factors related to bond price volatility?
In a closed economy, how would each of the following events affect bond price and market...
In a closed economy, how would each of the following events affect bond price and market interest rate? Use the figures of both bond market and market of loanable funds to illustrate the changes to the interest rates. Many investors feared that Greece may default on its bonds. Show how this affected the prices and interest rates on Greek bonds. In 2008, the liquidity of mortgage-backed securities declined significantly. Show how this affected the price and interest rate of mortgage-backed...
How are investors in pass-through securities protected against default risk emanating from the mortgagees and the...
How are investors in pass-through securities protected against default risk emanating from the mortgagees and the FI/trustee? A) In cases where the bank or the trustee defaults on the timely pass-through of the mortgage payments, GNMA will make the payments. B) State governments insure them and thus, make the payments. C) There is no credit risk and thus, no default risk. D) The local government will chip in and make half of the payments. E) None of the above
The government is faced with a lot of challenges when dealing with higher prices. How do...
The government is faced with a lot of challenges when dealing with higher prices. How do you think price gouging can impact their decisions that they have to make.
When the non-dividend paying stock price is $20, the strike price is $20, the risk-free rate...
When the non-dividend paying stock price is $20, the strike price is $20, the risk-free rate is 6%, the volatility is 20% and the time to maturity is three months. Work the problem out how you would do not use excel (a) What is the price of a European put option on the stock using BSM model? (b) At what stock price the seller of the European put will break even
Read the article ‘How stocks test young investors’. When deciding how much to invest in stocks,...
Read the article ‘How stocks test young investors’. When deciding how much to invest in stocks, Mr Kitces says, your first consideration should be how comfortable you are with risk to begin with. This is what’s known as your ‘risk tolerance. ’ The problem: Investors — particularly young ones — are notoriously bad at predicting how much money they are willing to lose. Compounding the problem, young investors, due to their lack of experience in the markets and overall financial...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT