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Rank the following assets from the lowest level to the highest level of (i) transaction costs, (ii) risk, and (iii) liquidity. Ties are acceptable for items that have indistinguishable rankings.
a bank deposit with a guaranteed interest rate
a share of a highly diversified mutual fund, which can be quickly sold
a share of the family business, which can be sold only if you find a buyer and all other family members agree to the sale
What relationship would you expect to find between the level of development of a country’s financial system and the country’s level of economic development? Explain in terms of the country’s levels of savings and investment spending.