Finance Unit 2 Test Review

occur when a business sells its stocks or bonds directly to savers, without going through any type of financial institution.

• Direct Transfer

• Investment Banks

• Financial Intermediaries

An underwriter facilitates the issuance of securities.

• Direct Transfer

• Investment Banks

• Financial Intermediaries

such as a bank, an insurance company, or a mutual fund.

• Direct Transfer

• Investment Banks

• Financial Intermediaries

capital flows efficiently from those with surplus capital to those who need it.

• Direct Transfer

• Investment Banks

• Financial Intermediaries

• Capital Allocation Process

A corporation that is owned by a few individuals who are typically associated with the firm’s management.

• closely held corporations

• publicly owned corporations

• behavioral finance

A corporation that is owned by a relatively large number of individuals who are not actively involved in the firm’s management.

• closely held corporations

• publicly owned corporations

• behavioral finance

Borrows insights from psychology to better understand how irrational behavior can be sustained over time.

• closely held corporations

• publicly owned corporations

• behavioral finance

They underwrite, distribute, and design investment securities for corporations to help them raise capital.

• Investment Bank

• Commercial Banks

• Financial Service Corporations

• Credit Unions

1. They accept deposits from savers and make loans to people who need it. They provide various services, such as checking accounts and money market transactions, to facilitate capital exchange between savers and people who need it.

• Investment Bank

• Commercial Banks

• Financial Service Corporations

• Credit Unions

1. Financial conglomerates that combine a range of financial services

• Investment Bank

• Commercial Banks

• Financial Service Corporations

• Credit Unions