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Why are financial intermediary debt contracts (loans) a more important source of external financing as compared with the issuance of equity (stocks) and debt (bonds) through the financial markets.  In addition, why has the financial markets increased in importance as of late?

Assume locational arbitrage is possible and involves two different banks. The realignment that would occur due to market forces would increase one bank’s ask rate and would decrease the other bank’s bid rate.

A deficit in the U.S. current account:

In a bank panic, the source of contagion is the _____________________.

A call option exists on British pounds with an exercise price of $1.61, a 90-day expiration date, and a premium of $.03 per unit. A put option exists on British pounds with an exercise price of $1.61, a 90-day expiration date, and a premium of $.02 per unit. You plan to purchase options to cover your future receivables of 700,000 pounds in 90 days. You will exercise the option in 90 days (if at all). You expect the spot rate of the pound to be $1.58 in 90 days. Determine the amount of dollars you expect to receive, after deducting payment for the option premium.

The recession caused by the global financial crisis was severe, but much smaller in magnitude than the Great Depression. because ________________________.

Assume the following information:   You have $1,000,000 to invest: Current spot rate of pound = $1.30 90-day forward rate of pound = $1.28 3-month deposit rate in U.S. = 3% 3-month deposit rate in Great Britain = 4%   If you use covered interest arbitrage for a 90-day investment, what will be the amount of U.S. dollars you will have after 90 days?

Volusia, Inc. is a U.S.-based exporting firm that expects to receive payments denominated in both euros and Canadian dollars in one month. Based on today’s spot rates, the dollar value of the funds to be received is estimated at $300,000 for the euros and $500,000 for the Canadian dollars. Based on data for the last fifty months, Volusia estimates the standard deviation of monthly percentage changes to be 8 percent for the euro and 3 percent for the Canadian dollar. The correlation coefficient between the euro and the Canadian dollar is 0.30. What is the portfolio standard deviation?

In the past, many deaf people lived in _____ because they had no way to communicate with others.

Assume that the U.S. places a strict quota on goods imported from Japan and Japan does not retaliate.  Holding other factors constant, this event should cause the supply of U.S. dollars to be exchanged for Japanese yen to ___________ and the value of the U.S. dollar to _______.