a. Carson is providing the funds by investing in the treasury securities. A surplus unit is the only unit that can invest in securities.
b. As a deficit unit, Carson has actively borrowed the required funds from the financial institutions.
c. Providing the required funds for the expansion can facilitate Carson’s expansion.
d. As like finance companies, by providing the required funds for the expansion, commercial banks can facilitate Carson’s expansion.
e. This limitation could be because of the borrowing of the Carson that reached its maximum limit. Because of this situation, banks and other financial institutions becomes reluctant in lending more funds.
f. Investment banks can facilitate Carson’s expansion by proving suggestion for acquisitions or by underwriting the securities offerings.
g. In the primary market, Carson can issue the stocks or float the bonds to obtain the required funds required for expansion.
h. As Carson has been buying the treasury securities, it can sell those securities in the secondary market to obtain the fund.
i. If the financial markets were perfect, then the deficit unit would directly get the funds from the surplus unit. There would be no role of investment banks in acquisition or in the issuance of bonds and stocks in the market.
j. This condition was put forward to control the improper use of the funds by Carson that would increase the risk. If such provision was not made, then the risk of default would have increased causing the loss to the lenders of the fund.
a.If the interest rate changes in the future, then it will directly affect the Carson’s procurement cost thereby affecting the profits and the stock price.
b. As the Carson has been expecting that the US economy will be stronger, the interest rate must increase in the future.
c. If the interest rates increases, then the cost of Carson’s borrowing will increase.
d. In case if there is high chance of interest rate to rise, then it is good to lock the interest rate today for the future borrowing. This will reduce the cost of borrowing.
