Capital Markets.docVIP

Chapter 1 – Capital Markets Financial Services INVESTMENT OBJECTIVES Primary Objectives: Secondary Objectives: Safety Liquidity Income Tax Minimization Growth Always identify a primary and secondary objective Primary can also be used as secondary objectives Capital SOURCE: The only source of capital is SAVINGS Individuals - trends Table 1.1 Business Characteristics: Mobile - move quickly between investments countries Sensitive - to economic or political change or instability Scarce - not enough to meet all needs Capital Markets: - markets where financial instruments trade - facilitate transfer of wealth from suppliers to users of capital USERS - Individuals - Business - Government - Federal Provincial Municipal TRANSFER OF CAPITAL Direct $ Business Saver Securities (shares bonds) Indirect through Investment Dealer Securities Securities Business Investment Saver $ Dealer $ Indirect Through Financial Intermediary Business Intermediaries Securities Securities Business Financial Saver $ Intermediary $ Financial Instrument - facilitate transfer of capital Debt - ST -LT Equity - common - preferred Investment Funds - Derivatives - higher level - value based on the value of something else Other - Income Trusts - ETF Financial Market - Categories By Product Money Market - short term debt maturing in less than 1 year Stock Market - own part of company Bond Market - promise to pay interest and repay principal Capital Markets - 2 By Distribution Primary - new security - first time issued to public - funds flow from investor investment dealer company Secondary - existing security - traded between investors - Resale - funds flow from investor investment dealer investor By Method of Operation Auction Market - (stock) exchanges -price determined by the interaction of supply and demand for security - p