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Growth of foreign financial markets; use of an intermediary

1. What have been the major factors contributing to growth in the foreign financial markets?

2. You are a corporate treasurer seeking to raise funds for your firm. What are some advantages of raising funds via a financial intermediary (FI) rather than by selling securities to the public?

3. How can a depository intermediary afford to purchase long term risky direct claims from fund's demanders and finance these purchases with safe, liquid, short term, low denomination deposits? What can go wrong in this process?

4. Discuss the benefits to funds suppliers of using a financial intermediary asset transformer in place of directly purchasing claims such as stocks or bonds. What is the major disadvantage?

5. What major forces are bringing about change in the financial services industry today?

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1. What have been the major factors contributing to growth in the foreign financial markets?

a. The globalization of industry has forced large companies to deal with local currencies for payment of workers and materials, for collection of revenue from different countries

b. Large organizations realized the potential for profit in trading in foreign currencies

c. Borrowing in foreign markets may be cheaper and may promote better relationships with other countries and economies.

d. The increase in wealth in places like Dubai, China, for two examples.

e. The reduction in trade barriers, and increases in trading blocs.

2. You are a corporate treasurer seeking to raise funds for your firm. What are some advantages of raising funds via a financial intermediary (FI) rather than by selling securities to the public?

a. Using a financial intermediary opens markets that may not be directly available to corporations. The FI's can shift funds between surplus and deficit agents for better rates, and more availability. This is particularly true in tapping into federal funds.

b. Selling securities to the public in the US is a complex and expensive process. Underwriting new financial issues requires multiple layers of compliance and costs. Selling securities in a foreign financial market may be even more complex in dealing with international laws or laws of countries in which companies ...

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