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Tutorial 1

The document presents a tutorial overview of financial systems, focusing on a case study involving Susie's investment options. It poses discussion questions regarding the benefits of financial intermediation, the importance of financial markets, and the roles of direct and indirect finance. Additionally, it emphasizes the significance of diversification in promoting risk-sharing among investors.

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Jermaine Ray Ananth
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17 views1 page

Tutorial 1

The document presents a tutorial overview of financial systems, focusing on a case study involving Susie's investment options. It poses discussion questions regarding the benefits of financial intermediation, the importance of financial markets, and the roles of direct and indirect finance. Additionally, it emphasizes the significance of diversification in promoting risk-sharing among investors.

Uploaded by

Jermaine Ray Ananth
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

FIN 2024 Financial Institutions and

Markets
Tutorial 1 Overview of the Financial Systems
Discussion Questions:
Susie has inherited MYR500,000 from her grandparents and is thinking of investing them. She is
thinking if she would be better off lending the money to her brother in his existing business or
putting them into fixed deposits in Maybank. Susie’s brother is offering an interest of 8% p.a. for
her lending and the Maybank’s 1-year fixed deposit rate is at 3.2% p.a

a. By using what you learnt about the benefits of financial intermediation, what
advantages would she have if she puts her money in a fixed deposit in Maybank
rather than lending it to her brother?
b. In your opinion, should return on investment be the final ultimatum of Susie’s
decision?

Short Discussions
1. Why are financial markets important to the health of the economy? What were the
financial assets have you learnt so far in your first year of study?
2. Some economists suspect that one of the reasons that economies in developing
countries grow so slowly is that they do not have well-developed financial markets.
Does this argument make sense?
3. Discuss the importance of direct finance and indirect finance in the financial system by
explaining their roles.
4. Provide an example of how a commercial bank plays a crucial role in indirect financing in
a financial system. Can you name other structures of financial institutions that play a
role in indirect financing?
5. Discuss how diversification promotes risk-sharing among investors in financial
institutions.

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