1. Compare and contrast direct finance and indirect finance. Which is more likely to have a larger share of the total financial market in a mature economy? In a young economy? Why?
2. What is the relationship between the efficiency of a financial system and the rate of economic growth? 7 Describe the major types of risks to financial securities, and give a specific example of each. How do investors measure risk? 9 What is liquidity, and why do investors care about it?
3. How does a high rate of inflation affect money in all its different roles? 7 How might the payments system evolve over time to reduce transactions costs for society?
4. Why are security prices and interest rates inversely related? 10 What information do you need to be able to negotiate an automobile lease? Do you need any other equipment, such as a calculator, financial tables, or anything else?