Why have funds replaced most of direct finance in recent decades? How has their growing importance...

Why have funds replaced most of direct finance in recent decades? How has their growing importance changed the way our economy (and our financial system) works? Distinguish between the different types of funds dominating today's financial system!

Expert Solution

Funds have replaced most of direct finance because of the following advantages that they provide:

Funds take on the responsibility of investing somebody else's money which lets people concentrate on their own day to day lives rather than try and figure out investing opportunities.
Funds are run by veteran investors who can invest in much better and informed ways than individual retail investors.

Growing importance of funds has led to a lot of money getting concentrated on the balance sheets of a few. This has impacted the economy both in good and in bad ways. The good thing is that liquidity is easy to come by in the financial markets now. Any financial institution or corporation in need of funds can easily raise money. The bad thing is that concentration of money means that one bad decision can wipe out a lot of wealth which is what happened in the financial crisis. Too few people were making decisions about huge sums of money.

The different types funds are mutual funds, hedge funds, pension funds, insurance companies etc.

jeff jeffy answered 1 year ago

How youth gangs have changed in recent decades?

Recent publications have hinted at the growing importance of sleep in the elderly in order to...

Recent publications have hinted at the growing importance of sleep in the elderly in order to maintain good health. Suppose a researcher is interested in the hypothesis that the difference in average hours of sleep differs significantly between men aged 35-45 and men aged 45+. Assume the following table summarizes the descriptive statistics for SRSs from each age group. Carry out the appropriate statistical test to answer the researcher’s hypothesis regarding the difference in average hours of sleep between the...

(a) Why is indirect finance, relative to direct finance, more widely used for channelling funds? (15...

(a) Why is indirect finance, relative to direct finance, more widely used for channelling funds? (b) How does the moral hazard affect the choice between debt and equity contracts? How does a debt contract reduce the problem of moral hazard?

76. Economies have been generally showing strong rates of growth in recent decades, but how has...

76. Economies have been generally showing strong rates of growth in recent decades, but how has inequality (both within countries and between countries) changed during the time? 77. Discuss possible factors driving changes in economic inequality within and between countries. 78. What roles do human capital, natural resources, physical capital, and technology play in influencing long-run economic growth of aggregate output per capita? 84. Why is real GDP per capita used as a measure of a country's standard of living?...

What is the importance of finance? What is the function of the Finance Manager? Why is...

What is the importance of finance? What is the function of the Finance Manager? Why is it important for a corporation? What is the international financial market? Why is it important that finance managers know about the financial domestic market and international?

Tyler Inc.'s most recent annual dividend was $3.50 a share. The firm has been growing at...

Tyler Inc.'s most recent annual dividend was $3.50 a share. The firm has been growing at a consistent 4% rate for several years, but analysts generally believe better times are ahead and future growth will be in the neighborhood of 5%. The stock is currently selling for $78. Stocks similar to Tyler earn returns ranging from 8% to 10%. Calculate value for a share of Tyler at interest rate of 8%. Round the answer to two decimal places. $ ...

Tyler Inc.'s most recent annual dividend was $3.65 a share. The firm has been growing at...

Tyler Inc.'s most recent annual dividend was $3.65 a share. The firm has been growing at a consistent 4% rate for several years, but analysts generally believe better times are ahead and future growth will be in the neighborhood of 5%. The stock is currently selling for $79. Stocks similar to Tyler earn returns ranging from 8% to 10%. Assuming that instead of rising, Tyler's growth rate remains at 4% or declines to 3%. Round your answers to two decimal...

The Importance of Behavior Finance Behavioral finance has grown to be an important topic in the...

The Importance of Behavior Finance Behavioral finance has grown to be an important topic in the field of finance. In this discussion, define what behavioral finance is and discuss at least one of the aspects or concepts that can be found in behavioral finance. Then, include in your discussion details on why it is important for finance professionals to understand this concept. Please elaborate within 300 words. Thanks!

In recent years, bioplastics have been used in various fields, it can be replaced with conventional...

In recent years, bioplastics have been used in various fields, it can be replaced with conventional plastics in the field of application which can be used in various categories such as food packaging, storage containers or other plastic or composite materials and therefore can help in making the environment sustainable. Further, the structure of polymer greatly influences its properties. Organic compounds and their reactions play an important role in the modern industries such as dyes, food processing, and agricultural products....

What is direct democracy? Why is direct democracy a feature of the California Constitution? In recent...

What is direct democracy? Why is direct democracy a feature of the California Constitution? In recent decades, has direct democracy been a useful tool for ordinary citizens? Your essay should include all of the following elements: A general discussion of what direct democracy is and why reformers advocated for direct democracy. Discussion of the historical context in which the California Constitution was revised to include direct democracy. A description of each of the key tools of direct democracy. Discussion of...

Question