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SQ20-3
What are the essential characteristics of common stock?

SQ20-14
What is the random walk hypothesis? Does research evidence tend to support or deny the validity of this hypothesis?

SQ21-9
Discuss the factors that influence the volume of borrowing by individuals and families. What role do you believe inflation plays in the borrowing and savings decisions households today?

SQ21-10
What factors do lending institutions usually consider when evaluating a consumer loan application? Why?

SQ22-3
What are the advantages and disadvantages of home ownership for the consumer?

SQ22-5
List the principal mortgage lending institutions in the United States. Which is most important? What particular areas of the market?

SQ17-1
What are the principal purposes or goals of financial institutions' regulation?

SQ17-13
Why might there be a need for fewer regulatory agencies in the financial sector today?

SQ18-1
What exactly is fiscal policy and Debt management policy?

SQ18-2
Explain how fiscal and debt management policy might be used to help fight inflation and unemployment. Can you see any weakness or potential problems with the use of these policy tools?

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Solution Summary

The solution provides a discussion to each of the questions presented. The main topics include common stock, random walk, individual borrowing, home ownership, loan purposes, regulatory agencies, fiscal policy, debt management, inflation, and unemployment.

Solution Preview

SQ20-3
What are the essential characteristics of common stock?

SQ20-14
What is the random walk hypothesis? Does research evidence tend to support or deny the validity of this hypothesis?

SQ21-9
Discuss the factors that influence the volume of borrowing by individuals and families. What role do you believe inflation plays in the borrowing and savings decisions households today?

SQ21-10
What factors do lending institutions usually consider when evaluating a consumer loan application? Why?

SQ22-3
What are the advantages and disadvantages of home ownership for the consumer?

SQ22-5
List the principal mortgage lending institutions in the United States. Which is most important? What particular areas of the market?

SQ17-1
What are the principal purposes pr goals of financial institutions' regulation?

SQ17-13
Why might there be a need for fewer regulatory agencies in the financial sector today?

SQ18-1
What exactly is fiscal policy and Debt management policy?

SQ18-2
Explain how fiscal and debt management policy might be used to help fight inflation and unemployment. Can you see any weakness or potential problems with the use of these policy tools?

Answers:

SQ20-3
What are the essential characteristics of common stock?

Common stock grants voting rights to shareholders. Shareholders have the right to receive dividends paid out by the company, and have an automatic claim on the company's assets, should the company either dissolve or liquidate. The amount of determination given is based on the percentage of ownership held in the company.

SQ20-14
What is the random walk hypothesis? Does research evidence tend to support or deny the validity of this hypothesis?

The random walk hypothesis is a financial theory that contends that stock market prices continue based on random walks. According to the theory, a stock market price cannot be predicted because of the principle of randomness. Research has tended to support the hypothesis in the past. When a stock performs at a certain number one day, there is no real, valid way to predict how the stock will perform the next day, due to the factor of randomness. The random walk itself is a mathematical hypothesis contending that there will always be randomness in any pattern.

SQ21-9
Discuss the factors that influence the volume of borrowing by individuals and families. What role do you believe inflation plays in the borrowing and savings decisions households today?

This is a double-edged sword. People borrow more during inflation, because prices are so high. ...

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