Bus 100 Ch 18

Bus 100 Ch 18 - Chapter 18 Financing and Investing Through...

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Unformatted text preview: Chapter 18 Financing and Investing Through Securities Markets L e a r n i n g G o a 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 Securities Financial instrument such as stocks and bonds. PRIMARY VERSUS SECONDARY MARKETS Primary market Market in which new security issues are first sold to investors; issuers receive the proceeds from the sale. Stock offering gives investors the opportunity to purchase ownership shares in a firm and to participate in its future growth, in exchange for providing current capital. Initial public offering (IPO) The first sale of a companys stock to the general public. Securities are sold on the open market and through investment bankers. U.S. Treasury accepts both competitive and noncompetitive bids for its securities. Investment bankers Financial spets 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. Investment bankers underwrite stock and bond issues at a discount, which is their compensation for their services. Secondary market Market in which existing security issues are bought and sold by investors. Examples: New York Stock Exchange , Nasdaq On a typical day, more than $50 billion worth of stock is traded on NYSE. TYPES OF SECURITIES Money Market Instruments Money market instruments Short-term debt securities issued by corporations, financial institutions, and governments. Generally low-risk securities and are purchased by investors when they have surplus cash....
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This note was uploaded on 04/07/2008 for the course BUS 100 taught by Professor Choate during the Fall '07 term at Bradley.

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Bus 100 Ch 18 - Chapter 18 Financing and Investing Through...

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