1. What are the ways by which a firm or an individual can obtain funds in the financial system?

2. What is a debt instrument?

3. What is the difference between short-term, long-term and intermediate-term debt instruments?

4. What is a dividend?

5. What is the main disadvantage of owning a corporation’s equities?

6. Who is a residual claimant?

7. What is the main advantage of holding equi­ties?

8. What is a primary market?

9. What is a secondary market?

10. What is the role of the investment bank in a primary market?

11. What are the examples of secondary markets?

12. Why are securities brokers and dealers crucial to a well-functioning secondary market?

13. What are the functions of secondary markets?

14. In what ways can secondary markets be organized?

15. What are the examples of organized exchanges?

16. Why is the OTC market very competitive?

17. What are the examples of OTC markets?

18. What financial instruments are traded in OTC markets?

19. What is the basis for distinguishing between money and capital markets?

20. What is the money market?

21. What is the capital market?

22. Why do money market securities tend to be more liquid and safer investments?

    

    Listening

23. Why are such financial instruments of the capital market as stocks and long-term bonds often held by financial intermediaries such as insurance companies and pension funds?

Exercise 16. Choose the correct alternative.

1. People who save are frequently/ rarely the same peo­ple who have profitable investment opportunities available to them.

2. If you do not have an investment opportunity that will per­mit you to earn income with your savings, you will earn great/ no interest.

3. If you could get in touch with a profitable entrepreneur, you could lend him the $1000 at a rental fee (interest)/ commission of $100 per year, and both of you would be better off.

4. Without financial markets, it is easy/ hard to transfer funds from a per­son who has no investment opportunities to one who has them.

5. The existence of financial markets is also beneficial even if someone borrows for a purpose other than decreasing/ increasing production in a business.

Exercise 17. Listen to Jack Peterson, a successful businessman, talking with his colleague about the importance of channeling funds from savers to spenders and check the alternatives you have chosen.

Exercise 18. Here are some of the key ideas concerning the relationship between savers and spenders. Look them through, listen to the dialogue again and number each point in the order in which he mentions them.

1. Without financial markets, it is hard to transfer funds from a per­son who has no investment opportunities to one who has them.

2. Suppose that you have saved $1000 this year, but no borrowing or lending is possible because there are no financial markets.

3. You earn a good salary, but because you have just started to work, you have not yet saved much.

4. Financial mar­kets are essential to promoting economic efficiency.

5. Without financial mar­kets, you are stuck; you cannot buy the house and will continue to live in your tiny apartment.

Exercise 19. Comment on the statements given above.

Translation Practice

Exercise 20. Translate into English.