Financial Institutions and Markets / FIN402

This assignment is an individual assignment.

The assignment must be submitted in WORD format only.

Assignments submitted through email will not be accepted.

Students are advised to make their work clear and well presented, marks will be deducted for poor presentation. This includes filling your information on the cover page.

Students must mention question number clearly in their answers.

Late submissionwill NOT be accepted.

Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.

All answers must be typed using Times New Roman font (size 12, double-spaced). No pictures containing text will be accepted and will be considered plagiarism.

Submissionswithout this cover page will NOT be accepted.

Assignment Purposes/Learning Outcomes

CLO3:Discuss implications of the efficient market hypothesis for the allocation of funds.

CLO4:Compare and contrast the role of and function of organized financial markets andfinancial intermediaries.

Attempt all Questions Maximum Marks :10

1.

”If bonds of different maturities are close substitutes, their interest rates are more likely to move together.” Is this statement true, false, or uncertain? Explain your answer. (3Marks)

2.

Suppose that increases in the money supply led to a rise in stock prices. Does this mean that when you see that the money supply has had a sharp rise in the past week, you should go out and buy stocks? Why or why not? (3Marks)

3.

Describe two ways in which financial intermediaries help to lower transaction costs in an economy like Kingdom of Saudi Arabia (2Marks)

4.

How can conflicts of interest make financial service firms less efficient? (2Marks)

Answers:

1.2.3.4.