Capital Markets: Primary vs. Secondary

False (B)

prevent systemic risks

<p>follow-on</p> Signup and view all the answers

<p>New securities are issued. = Primary Market Existing securities are traded. = Secondary Market Funds flow from investors to issuers. = Primary Market Funds flow between buyers and sellers of securities. = Secondary Market</p> Signup and view all the answers

<p>Primary Market (D)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Provides liquidity and price discovery</p> Signup and view all the answers

<p>Common</p> Signup and view all the answers

<p>Stocks (C)</p> Signup and view all the answers

<p>Bonds (D)</p> Signup and view all the answers

<p>Derivative (B)</p> Signup and view all the answers

<p>Investing primarily in a single company's stock, leading to significant losses when the company underperforms. (B)</p> Signup and view all the answers

<p>Stocks = Represent ownership in a company Bonds = Long-term debt securities issued by governments or corporations Derivatives = Contracts whose value is derived from underlying assets Mutual Funds = Pooled investments in diversified portfolios</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Behavioral risk stems from investor biases and emotional decision-making, leading to suboptimal investment outcomes. An example is selling investments during a market panic due to fear of further losses.</p> Signup and view all the answers

<p>long-term</p> Signup and view all the answers

<p>Mobilizing Savings = Channels individual and institutional savings into productive investments. Resource Allocation = Allocates financial resources efficiently to projects and sectors with the highest returns. Liquidity Provision = Enables investors to buy and sell securities, ensuring liquidity in the financial system. Price Discovery = Helps determine the fair market value of securities based on supply and demand.</p> Signup and view all the answers

<p>Liquidity (C)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Price discovery helps determine the fair market value of securities based on supply and demand, ensuring that prices reflect available information and thus promoting efficient resource allocation.</p> Signup and view all the answers

<p>A company declares bankruptcy and cannot make its scheduled bond payments. (D)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Funding liquidity risk can impact a company's financial stability by making it difficult to meet its short-term obligations, potentially leading to financial distress or even bankruptcy.</p> Signup and view all the answers

<p>liquidity</p> Signup and view all the answers

<p>Fixed deposits with a predetermined interest rate. (D)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Bond prices and interest rates have an inverse relationship; when interest rates rise, bond prices typically fall, and when interest rates fall, bond prices typically rise.</p> Signup and view all the answers

<p>Default Risk = Issuer fails to make scheduled payments Liquidity Risk = Difficulty in selling an asset quickly without significant price reduction Inflation Risk = Decrease in purchasing power of returns due to rising prices Interest Rate Risk = Changes in interest rates affecting the value of fixed-income investments</p> Signup and view all the answers

<p>Guaranteeing profits for investors. (D)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Liquidity and risk diversification</p> Signup and view all the answers

<p>issuers</p> Signup and view all the answers

<p>Retail Investors = Individuals buying stocks or bonds Investment Banks = Facilitate transactions in the capital market Stock Exchanges = Platforms where securities are traded Institutional Investors = Large entities like pension funds</p> Signup and view all the answers

<p>Facilitating the buying and selling of existing shares between investors. (B)</p> Signup and view all the answers

<p>Insider trading and fraud. (B)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Application Supported by Blocked Amount (ASBA) is a process where the application money remains in the investor's account until allotment, preventing fund transfer until necessary.</p> Signup and view all the answers

<p>diversify</p> Signup and view all the answers

<p>Facilitating economic growth (D)</p> Signup and view all the answers

<p>Applying for an IPO = Primary Market Placing a Buy Order = Secondary Market Allotment of Shares = Primary Market Trade Execution = Secondary Market</p> Signup and view all the answers

<p>It allows you to benefit from compounding and market growth. (D)</p> Signup and view all the answers

<p>False (B)</p> Signup and view all the answers

<p>Demat account</p> Signup and view all the answers

The risk that a bond issuer will fail to make payments.

The risk of a credit rating agency lowering an issuer's credit rating.

The risk that an investment cannot be sold quickly without losing value.

Risk arising from fewer buyers or sellers for an asset.

Risk of not having enough cash or assets to meet obligations.

The risk that inflation will erode the purchasing power of returns.

Risk of having to reinvest returns at a lower interest rate.

The risk that changing interest rates will affect bond values.

Economic downturns and geopolitical events that harm market performance.

Institutions that ensure fair practices and transparency in capital markets.

The market where new securities are issued to raise capital for companies.

Market where existing securities are traded, providing liquidity to investors.

Strict norms enforced by regulators to minimize information asymmetry.

Use of financial instruments to manage investment risks.

Selling shares of a company to the public for the first time.

Equity instruments representing ownership in a company.

Long-term debt securities issued by governments or corporations.

Contracts whose value is derived from underlying assets.

Pooled investments in diversified portfolios.

Investment funds traded on stock exchanges like stocks.

Entities involved in the buying and selling of securities.

Entities that issue securities to raise capital, like corporations or governments.

Individual investors who buy stocks or mutual funds.

Brokers and dealers that facilitate capital market transactions.

Fluctuations in security prices that can cause uncertainty.

The ease of buying and selling securities in the market.

Adhering to laws and regulations governing market operations.

An account that holds shares in electronic form.

An account used to buy and sell securities.

The number of shares offered in an IPO bid.

Application Supported by Blocked Amount for IPOs.

Spreading investments across various sectors.

Investing with the intention of holding for years.

Risk from reliance on a single asset, sector, or region in a portfolio.

Risk arising from international conflicts affecting financial markets.

Risk from investor biases leading to poor decisions.

A market for buying and selling long-term financial securities.

Channeling savings into productive investments.

Efficiently distributing financial resources to high-return projects.

The ability to buy and sell securities quickly in a market.

Determining the fair market value of securities through supply and demand.