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Questions and Answers
Where are short-term funds raised through the buying and selling of short-term debt securities like commercial papers?
Which market deals with long-term debt securities such as bonds?
Where do new shares get issued and sold to the investing public for the first time?
In which market can an investor buy and sell stocks?
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Which market is classified as dealing with short-term funds?
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Where is capital raised by companies selling stock directly to investors typically through an initial public offering (IPO)?
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In which market can investors buy existing shares of a company after they have been issued to the public?
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What is the purpose of an initial public offering (IPO)?
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Who receives the proceeds from a secondary market transaction?
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What role does an underwriter or investment banker play in a primary market transaction?
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Where can investors buy existing shares of San Miguel Corporation after its IPO?
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What is the main function of the secondary market?
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Study Notes
Short-Term and Long-Term Debt Markets
- Short-term funds are raised through the buying and selling of short-term debt securities, like commercial papers, in the money market.
- Long-term debt securities, such as bonds, are dealt with in the capital market.
Initial Public Offerings (IPO) and Stock Markets
- New shares are issued and sold to the investing public for the first time in the primary market, often during an IPO.
- Stocks can be bought and sold in the secondary market; this includes trading existing shares of a company.
Capital Raising and Investment
- Capital is raised by companies selling stock directly to investors, typically through an initial public offering (IPO).
- After shares have been issued to the public during an IPO, investors can buy existing shares in the secondary market.
Purpose and Proceeds of IPOs
- The primary purpose of an IPO is to raise capital for the company by offering shares to public investors for the first time.
- Proceeds from a secondary market transaction do not go to the issuing company; instead, they are received by the seller of the shares.
Role of Underwriters and Market Functions
- Underwriters, or investment bankers, play a crucial role in facilitating primary market transactions by helping to price and sell new securities.
- The primary function of the secondary market is to provide liquidity, allowing investors to buy and sell existing securities, such as stocks, efficiently.
Example of Secondary Market Transactions
- Investors can purchase existing shares of companies, such as San Miguel Corporation, in the secondary market after their IPO has taken place.
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Description
Understand the basics of financial markets, including securities trading in stock, bond, forex, and derivatives markets. Learn the importance of financial markets in capitalist economies and the classification into money markets and capital markets.
