Insurance companies

c. Insurance companies issue insurance policies
that promise to pay the policy holder a
specific form of benefit under specified
circumstances.
d. Finance companies issue secondary securities
that are similar to the debt and equity
instruments issued by nonfinancial
corporations.
8. The financial intermediary’s spread is the
difference between the average rate paid to
investors and the average rate earned on assets
(investments).
9. All other things being equal, an increase in a bank’s deposit interest rates decrease the spread because the cost of funds increases with rio corresponding increase in the rate earned on assets.
10. If the deposit rate increase is passed on to loan customers, the spread is not affected.
11. Primary markets bring surplus savings units together with deficit savings units in the process of financing productive activities. Securities are sold for the first time in primary markets. In secondary markets, existing securities change hands; that is, securities are transferred from one surplus savings unit to another.
12. Even though a corporation receives no further funding when its securities are exchanged in secondary markets, financial managers are concerned with the activity in secondary markets because the price of the firm’s stock measures shareholder wealth, the maximization of which is the objective of financial management. Also, the conditions in the secondary market provide managers with information with respect to the conditions under which additional financing in the primary market may be obtained.