Discuss the demand and supply curves for loans, and list some factors affecting interest rates.

1.       Discuss the demand and supply curves for loans, and list some factors affecting interest rates.

2.       Explain the role of a financial intermediary, and discuss how banks work.

3.       Describe the risk-return principle, and explain how it applies to the stock market.

4.       Review the benefits of the diversity of financial intermediaries.

5.       Summarize the key causes of the financial crisis.

6.       Suppose a company borrows $20 million for a year at an interest rate of 6 percent annually, with all interest and principal to be paid at the end of the year.  a) How much money will the company give the lender at the end of the year? b) How much is the principal, and how much is the interest payment?

Solution:

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