05+Equity_Markets

05+Equity_Markets - Financial Markets Introduction to...

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Financial Markets Introduction to Equity Securities Professor Roberts
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Agenda Financial Markets Overview Funds Flow Players Markets Equity Securities Types Creating Shares Trading Shares Stock Exchanges Regulations Reading Stock Quotes Measuring Return & Performance
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Have  $$ “Inve s to rs ” Ne e d $$ “Is s ue rs ” Depository Institutions Commercial Banks Credit Unions Mutual Savings Banks Financial Markets   Exchanges     NYS E     C BO T    OTC     NAS DAQ    Market Makers     Bro ke rs /De a le rs $$$ Security Flow of Funds
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Financial Markets Money Markets Initial maturity less than one year Short term needs Lower risk, higher liquidity, lower yield Capital Markets Initial maturity greater than on year Long-term investment needs Higher risk, lower liquidity, higher yield
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Financial Markets Money Markets Tre a s ury Bills C o m m e rc ia l P a pe r C e rtific a te s  o f De po s it Euro do lla r tim e  De po s its Fe de ra l Funds Re purc ha s e  Ag re e m e nts De rivative s  Ma rke ts Exc ha ng e -Tra de d   Future s   O ptio ns O ve r-the -C o unte r (O TC )   Fo rwa rds   S wa ps   O ptio ns C a pita l Marke ts Mo rtg a g e  Marke t Mo rtg a g e -Ba c ke d S e c uritie s   G innie  Ma e s  (G NMA)   Fa nnie  Ma e s  (FNMA)   Fre ddie  Ma c s  (FHLMC ) C o lla te ra lize d Mo rtg a g e   O b lig a tio ns  (C MO ’s ) Bo nd Ma rke t Tre a s ury No te s Tre a s ury Bo nds S TRIPS TIPS Munic ipa l Bo nds Ag e nc y Bo nds C o rpo ra te  Bo nds Eq uity Marke t C o m m o n S to c k   IPO   S e a s o ne d P re fe rre d S to c k Fo re ig n Exc ha ng e  Ma rke ts     S po t      Fo rwa rd      Future s
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Selling or Buying Shares Primary Market Market for new shares IPO (initial public offering) Follow-on offering (seasoned) Sold directly to certain investors Issuing company receives $$$$$ Secondary Market Trading in existing shares Liquidity “Scorecard” Trading among interested buyers and sellers • No $$$$ connection to issuing company Traded on selected stock exchanges
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Equity Markets Common Shares – What do I own? Ownership interest in net earnings MAY pay a dividend, but not legally obligated Ownership interest in net assets (assets- liabilities) of company Gets share of “What’s left over” after all other obligations are paid Voting rights to elect Board of Directors One share = one vote Invitation to the Annual Meeting
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How much control do I have?? Ownership interest =
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05+Equity_Markets - Financial Markets Introduction to...

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