Why do some countries develop strong financial markets and institutions while other do not? Give five reasons with explanations.

There are ten questions in this test and you must answer all ten questions. Each question carries five marks.

Use your own words and do not copy and paste text from teaching materials. Give full answers and explanations, using examples were possible and give references where needed. Do not use bullet points

Why do some countries develop strong financial markets and institutions while other do not? Give five reasons with explanations.

What is financial theory and how would you distinguish between a strong financial theory and a weak one?

How would you develop a financial theory into a quantitative model that can be tested against quantitative data, e.g., share prices or accounting ratios. Use an example such as the demand and supply of liquidity to illustrate your answer.

Explain how government policy decisions have impacted the development of financial markets & institutions. Give five examples.

Explain five way in which managers are incentivised or encouraged to work on behalf of investors rather than purse their own interests.

Explain the concept of time value of money and explain its’ relationship to inflation.

Explain why the supply of liquidity curve is upwards sloping while the demand curve is downward sloping.

How might investors respond to low interest rates. Give three ways and make sure you mention attitudes to risk.

What was the difference between the FCIC majority report and the minority report (credit bubble theory). Explain three key differences.

Give five examples of financial instruments that could be described as a “Bond”. Make sure you included both government bonds and corporate bonds in your answer.

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