Define each of the following terms:
a. Proprietorship: A business owned by one individual.
Partnership: A partnership exists when two or more persons associate to conduct business.
Corporation: A corporation is a legal entity created by a state. The corporation is separated and distinct from its owner and managers.
b. Limited partnership: A partnership in which limited partners’ liabilities, investment returns, and control are limited: general partners have unlimited liability and control.
Limited Liability Partnership: A limited liability partnership (LLP), sometimes called a limited liability company (LLC), combines limited liability advantage of a ...view middle of the document...
Bank loans and private placements of debt with insurance companies are examples of private market transactions.
Public markets: Markets in which standardized contracts are traded on organized exchanges. Securities that are issued in public markets, such as common stock and corporate bonds, are ultimately held by a large number of individuals.
Derivatives: Claims whose value depends on what happens to the value of some other asset. Futures and options are two important types of derivatives, and their values depend on what happens to the prices of other assets. Therefore, the value of a derivative security is derived from the value of an underlying real asset or other security.
f. Investment banker: An individual or a firm that assists in the design of issuing firm’s corporate securities and in the sale of the new securities to investors in the primary market.
Financial services corporation: A corporation that offers a wide range of financial services such as brokerage operations, insurance, and commercial banking.
Financial intermediary: Intermediary that buys securities with funds that it obtains by issuing its own securities. An example is a common stock mutual fund that buys common stocks with funds obtained by issuing shares in the mutual fund.
g. Mutual fund: A corporation that sells shares in the fund and uses the proceeds to buy stocks, long-term bonds, of short-term debt instruments. The resulting dividends, interest, and capital gains are distributed to the fund’s shareholders after the deduction of operating expenses. Some funds specialize in certain types of securities, such as growth stocks, international stocks, of municipal bonds.
Money market fund
h. Physical location exchanges: Exchanges, such as the New York Stock Exchange, that facilitate trading of securities at a particular location.
Computer/telephone network: A computer/telephone network, such as Nasdaq, consists of all the facilities that provide for security transactions not conducted at a physical location exchange. These facilities are, basically, the communication networks that link buyers and sellers.
i. Open outcry auction: A method of matching buyers and sellers in which the buyers and sellers are face-to-face, all stating a price at which they will buy and sell.
Dealer market: In a dealer market, a dealer holds an inventory of the security and makes a market by offering to buy and sell. Others who wish to buy or sell can see the offers made by the dealers and can contact the dealer of their choice to arrange a transaction.
Electronic communication network (ECN): In an ECN, orders from potential buyers and sellers are automatically matched and the transaction is automatically completed.
j. Production opportunities: The ability to turn capital into benefits. If a business raises capital, the benefits are determined by the expected rates of return on its production opportunities.
Time preferences for consumption: ...