Internal capital market as a source of financing


Task: True or False? Briefly explain in about 100 to 200 words.

a) The fact that firms so heavily rely on their internal capital market as a source of financing is strong evidence that internal markets are more efficient than external markets.

b) When underwriting equity or bond issues, investment banks are merely acting as financial intermediaries without taking any risk of their own. Therefore, they are charging unrealistically high fees for their services.

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Finance Basics: Internal capital market as a source of financing
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