Chapter 18

Chapter 18 - Introduction to Business . Minneapolis...

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Introduction to Business Instructor: Dave Skogstrom Office: Management Education Center, Room 1290 Phone: 612-659-6422 Email: www.dave.skogstrom@minneapolis.edu .
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Chapter 17 Securities Markets L e a r n i g   G o l s Distinguish between the primary and secondary securities markets. Compare money market instruments, bonds, and common stock, including their benefits. Identify the objectives of investors and the types of securities that best correspond to each. Describe the characteristics of the major stock exchanges. Explain the process of buying or selling a security and the information included in stock and bond quotations and stock indexes. Discuss the role of mutual funds and exchange-traded funds in the securities market. Evaluate the major features of regulations and laws designed to protect investors. 1 2 3 4 5 6 7
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3 Chapter 17 Overview Security - - is a stock, bond, or money market instrument that represents an obligation on the part of the issuer. Our final focus is on how stocks and bonds are sold in two marketplaces. The two marketplaces are the primary market and the secondary market.
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Securities Financial instrument such as stocks and bonds. PRIMARY VERSUS SECONDARY MARKETS Primary market Market where new security issues are sold for the first time to investors. The issuer (business) receives the proceeds from the sale. Initial public offering (IPO) The first sale of a company’s stock to the general public. Investment bankers Financial specialists who handle the sales of most corporate and municipal securities. Underwriting Process of purchasing an issue from a firm or government and then reselling the issue to investors. Secondary market Market in which existing security issues are bought and sold by investors. • Examples: New York Stock Exchange , Nasdaq
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5 The Primary Market It’s where the initial sale of stocks or bonds are sold. After these stocks are in the hands of the public, they’re then traded in the secondary markets. These stocks could be a completely new corporations or the expansion of an existing one. These stock offerings are called an initial public offering - IPO. Primary markets are also used to issue bonds by governments and corps. Examples of IPOs are in the Wall Street Journal and called tombstones. Investment bankers (or underwriters) typically handle the sale of these securities for a commission fee and the proceeds go to the corporation. From then on, this new stock is forever more traded in the secondary market.
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IPO Example of a Tombstone advertised in the Wall Street Journal.
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7 The Secondary Market Secondary Market - - financial markets where previously issued securities are traded among investors after they’ve been issued. It’s what you normally think of as the stock market.
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Chapter 18 - Introduction to Business . Minneapolis...

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