Introduction to Finance

 18. 
(LO 7.4)
Explain how fi nancial savings generated by a business 
is a function of its life cycle stage.
 19. 
(LO 7.5)
What are the two types of fi nancial market securities?
 20. 
(LO 7.5)
Identify and briefl y describe the major securities that 
are originated or traded in capital securities markets.

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188
C H A PT E R 7 Savings and Investment Process
Exercises
1. 
Go to the U.S. Department of Commerce, Bureau of Economic 
Analysis website at http://www.bea.gov and determine the following:
a. 
The current personal savings rate in the United States.
b. 
The amount of current corporate savings as refl ected in the 
amount of undistributed profi ts.
2. 
Assume you are an elected member of Congress. A lobbying group 
has agreed to provide fi nancial support for your re-election campaign 
next year. In return for the group’s support, you have been asked to 
champion their self-interests in the form of a spending bill that is 
being considered by Congress. What would you do? 
3. 
Match the following fi nancial instruments and securities with their 
issuers.
Instruments/Securities Issuers
a. 
corporate stocks 
1.
commercial banks
b. 
Treasury bonds 
2.
corporations
c. 
municipal bonds 
3.
U.S. government
d. 
negotiable certifi cates of deposit 
4.
state/local governments
4. 
Match the following fi nancial instruments and securities with their 
typical maturities.
Instruments/Securities Maturities
a. 
corporate stocks