Question

I. Financial Intermediaries:

1. Briefly describe each of the following financial intermediaries in terms of the way they help issuers raise capital:

Commercial Bank

Investment Bank

Financial Services Company

B. In what ways do efficient capital markets help both issuers and investors?

Answer 1

A.

  commercial bank is a type of financial intermediaries  that accepts deposits from account holder and pay interest on deposits, offers money market accounts, and CDs, provide banks with the capital to make loan. issuer can raise capital from the bank in the form of   loans for business purposes. Banks raise capital by charging interest on these loans. The interest charged by the bank is depend on the risk involved. Therefore, if there is more risk involved, banks charge more interest. so commercial bank help issuers to raise capital by loan that depend on credit rating

Investment Banking- They Issuing and Selling New Securities. When a issuer or other organization wants to raise funds, it frequently does so by issuing and selling new securities, such as stocks or bonds. An investment bank usually helps in this process by providing expertise and customers to buy the securities.  They also raise  through Initial Public Offerings (IPOs), , selling shares to investors through private placements, or issuing and selling bonds on behalf of the clients .

financial services company- firms that help to issuer to raise capital through various option firms include venture capital firm and other early stage capital provider Firms can raise the financial capital they need to pay for such projects in four main ways: (1) from early-stage investors; (2) by reinvesting profits; (3) by borrowing through banks or bonds; and (4) by selling stock by private

B.

Efficient capital markets are commonly thought of as markets in which security prices fully reflect all relevant information that is available about the fundamental value of the securities. For example, new information about the fundamental values of securities will be reflected in prices through competitive trading.

its helps to both investors and issuers , in Efficient capital markets no one can beat the market so it gives benefits to passive investor (index investing), all the investor have accurate information about securities .

issuers expands the pool of savings and   benefits, policymakers need to actively engage with potential market entrants. Efficient capital markets also provide liquidity and cost benefits to issuers and investors .