Financial Management Environment (5)

Question 1

Factors that affect interest rates

Answer 1

Inflation and borrowing demand
Level of risk
Duration of loan
Size of loan

Question 2

Do financial intermediaries affect interest rates?

Answer 2

Yes as they are needed to make a profit

Question 3

What is liquidity preference theory?

Answer 3

Yields need to rise as term of maturity increases

Question 4

What is expectations theory?

Answer 4

If interest rates are expected to increase in future, curve may rise more steeply

Question 5

What is market segmentation theory?

Answer 5

Different investors have a preference for and are interested in different segments of the yield curve

Question 6

Risk and UK gilt-edged securities?

Answer 6

The risk of default is not significant even for long-dated bonds

Question 7

What is P2P lending?

Answer 7

A method of debt financing that enables individuals to lend money to small businesses ignoring the intermediary

Question 8

What is security token offering?

Answer 8

The first issue of tokens (or crypto coins) that represent an investment contract in an underlying asset.

Question 9

Steps in STO process?

Answer 9

Preparation
Designing the offering
Selection of service providers
Raising capital
Listing of security on platform