Question

True/False 1) When a bank lends $500,000 to Mr. Wang for a mortgage on a building...

True/False

1) When a bank lends $500,000 to Mr. Wang for a mortgage on a building he wants to buy, this transaction is considered DIRECT FINANCE.

True/False

2) When LYFT went public, it accessed investors in the financial markets. This is an example of DIRECT FINANCE.

True/False

3) What are the TWO broadest categories of Financial Instruments

4) What does it mean to “deleverage”?

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Answer #1

Direct finance refers to method of financing in case where borrowers borrow funds directly via the financial market without using any intermediary.

1) When a bank lends $500,000 to Mr. Wang for a mortgage on a building he wants to buy, this transaction is considered DIRECT FINANCE.

FALSE

2) When LYFT went public, it accessed investors in the financial markets. This is an example of DIRECT FINANCE.

TRUE

3) What are the TWO broadest categories of Financial Instruments

Financial asset and Financial Liability

4) What does it mean to “deleverage”?

Deleveraging is process wheres a company attempts to reduce its financial leverage. Also ,it is the decrease of debt. The most prompt way for an entity to deleverage is to pay off any existing loans and obligations on its financial statements..

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