Question

1. capital allocation process Aa Aa The capital allocation process involves the transfer of capital among different entities that include individuals, small businesses, banks, financial intermediaries, companies, mutual funds, and ather market participants. In a developed market economy, capital flows freely between entities that want to supply capital to those who want it. This flow of capital can be classified in three ways. In the table below, identify the nature of capital transfer given in the scenario with it s appropriate classification Indirect TransfersI through Investment Banks Indirect Transfers through Financial Intermediaries Scenario Direct Transfers Eliot invests $25,0DD by purchasing 1,0DD shares of an emerging markets mutual fund. This mutual fund ivests in companies in Brazil, India, and China. He bought the mutual fund from the mutual und company Based in Grass Valley, Califomia, L& M Seeds Co. is a small company capital, the company sells stocks directly to savers in Grass Valley withoutinvolving any bank or financial intermediary xEdu.com is an early-stage start-up company that plans to issue its first public common stock-called an initial public offering (IPO)-in six months. It hires an investment bank to underwrite the issue. Erin borrows money from her uncle to buy a new laptop

Answer 1

1: Indirect transfers through financial intermediaries

(Since the mutual fund company was used for investment)

2: Direct transfers

(Stocks are sold directly to the investors)

3:Indirect transfers through investment banks

(Money is raised via the investment banks)

4:Direct transfers

(There is no investment bank or financial intermediary involved)