Finmart

Gabriel
a. Aside from the bank, suggest other financial intermediaries that help in the process of channelizing
the savings of the households into the most productive to use.
Undoubtedly, commercial banks are the most widely known used financial intermediaries. Other than
banks, different financial intermediaries can help Gabriel and his family to have full utilization of the cash
prize. I suggest they invest in: a.) Insurance company, b.) Regulated Investment Company (RIC), and c.)
Exchange-Traded Funds (ETF).
b. Identify the functions of those financial intermediaries that you will be suggesting.
Financial Intermediaries acts as the third party to facilitate transactions between lenders and borrowers.
Here are some other types of intermediaries aside from bank that can help in the process of channelizing
the savings of Gabriel into the most productive use:
It is inevitable for us to be in unfortunate events such as accidents. Insurance companies offer policies to
provide financial protection in case of a claim or loss. Its function is to help assess risks and provide
customers with the right coverage to compensate for any loss. Also, they have various offers like health
insurance, which are beneficial in a family and even to Gabriel himself. Insurance companies guarantee
their customers against risks. The customers have to pay insurance premiums in return for this insurance.
Although just like banks, insurance companies are also subject to interest rate risk. Since they invest the
premiums, there can also be a decline in their investments when interest rates go up. When there are
low-interest rates, there is a risk of not getting a sufficient return to pay to their policyholders.
The next option would be investing in a Regulated Investment Company (RIC). These companies' issues
share with the general public in exchange for cash. When proceeds are received, they invest the money
in a diversified portfolio of financial instruments. RICs allow individual shareholders to combine their
resources to take advantage of lower transaction costs when purchasing a large number of stocks. Lastly,
Exchange Traded Funds (ETF) are similar to mutual funds. They are like open-end funds, but share
pricing has small premiums or discounts from Net Asset Value (NAV), comparable to a closed-end fund.
The prices of ETFs vary depending on changes in the market supply and demand of the shares, which
makes it slightly different from NAV.
Dairy Co.
a) Name and explain the types of the financial market being approached by the company.
The company makes use of the Capital Market, a sector of financial markets where the financial
instruments issued will mature beyond a year from the issuance date. For example, securities like bonds,
stocks, etc. The buying and selling are composed of participants such as individuals and institutions.
Primary markets deal with the trade of new issues of stocks and other securities. Dairy Company also
considered this approach by conducting Public Offering, which is one of its issuing methods. As
mentioned, the company offered securities for sale to the general public. It is accomplished by issuing a
prospectus containing the offer to the public to purchase securities at a stated price. Proceeds received
from this kind of offers are used by the companies to finance their investment objectives, or as indicated,
the expansion plans of Dairy Company.
b) Identify the possible financial instruments to be raised for this.
The possible financial instruments to be raised for this are debt securities and equities. The former can be
bought or sold between parties and has basic terms defined, such as the notional amount, interest rate,
maturity, and renewal date. Some of its examples are government and corporate bonds, certificates of
deposit, municipal bond, or preferred stock. These securities can also come in the form of collateralized
securities.
One of the most common examples of equity is shares or stock. It depicts the amount of money that
would be returned to shareholders if all assets were liquidated, or when the company's debt was paid.
Investors can earn from equity through two methods: capital appreciation, a rise in the value of an asset
concerning the increase in market price, and dividends, payments made by corporations representing
excess earning of the company.
Property Corp.
a). Name and explain the types of the financial market being approached by the company.
There would be circumstances where a business collection of its revenues did not match the timing of its
need to pay its operating expenses. Based on the ongoing situation of Property Corporation, it requires funds for
its monthly expenditures. Thus, the money market would be the ideal approach to suggest. This sector of the
financial system caters to fund demanders who need short-term funds. This market is more efficient because it
trades financial instruments that are easily convertible to cash, and are redeemable within a short period, one year
or less.
b). Identify the possible financial instruments to be raised for this.
The money market deals with short-term financing instruments intending to increase the financial liquidity of
businesses. The foremost characteristics of these kinds of securities are that they’re convertible to cash at ease.
These let the borrowers meet their short-term demands and provide immediate liquidity to moneylenders. These
are some common examples of a traded financial instrument in the money market:
 Banker’s Acceptance, an order to pay a specific amount of money to the bearer at a later time;
 Treasury Bills, short-term government securities maturing in one year or less;
 Negotiable certificate of deposit, a savings account that holds a fixed amount of money without
withdrawals for a certain period, like months, year, or further, and when times comes, you can have the
money back together with interest earned;
 Commercial Papers, unsecured promissory notes, can be long or short-term. Since these are unsecured,
only large and creditworthy corporations can issue this.
These types of instruments are cash equivalents that are matched to fund the operational needs of the
Property Corporation. It involves lower risks because it has a short maturity term. Hence, these are the most
suitable financial instruments to raise in this requirement.

Finmart

Uploaded by

Copyright:

Available Formats

Finmart

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Finmart

Uploaded by

Copyright:

Available Formats

Gabriel

b) Identify the possible financial instruments to be raised for this.

b). Identify the possible financial instruments to be raised for this.

You might also like