Finance 301 Chapter 2

A financial system’s primary concern is funneling money from lender-savers to borrower-spenders
Is a process by which investment bankers purchase new securities directly from the issuing company and resell them to the investors underwriting
The ease with which a security can be sold and converted into cash marketability
The following theory states that security prices reflect all public information, but not all private information semistrong-form efficiency
The process of converting financial securities with one set of characteristics into securities with another set of characteristics financial intermediation
If you are a borrower, which would you prefer to occur during the life of your loan? a level of inflation that is higher than that anticipated at the outset of the loan
If the supply of loanable funds decreases relative to the demand for those funds, then we would expect…? interest rates to increase
The term money market is used because…? the instruments traded in this market are close substitutes for cash
The nominal rate of interest is made up of…? both the real rate of interest and compensation for inflation

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