FIN 370 Week 1 - DQ 3 - 7620

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·         What is the capital market? How is the primary market different from the secondary market? In your opinion, are these markets efficient? Why or why not?

A capital market is a market for securities where organizations can raise long-term funds. It includes the stock market and the bond market. Capital markets can be classified as primary or secondary. The primary market is the part of the capital markets that deals with the sales of new stock and bond issues. Investors are able to purchase the new securities directly from the company in initial public offerings, rights issues, or preferential issues. The secondary market is where previously issued securities and financial instruments are bought and sold from one investor to another. These markets are as efficient as currently capable with the technology that exists today. In the secondary market, investors are constantly appraising the values of companies by buying and selling shares previously issued by these companies. Current prices reflect all historical data and publicly available information. Prices quickly adjust to reflect the new information released. Primary markets' prices are somewhat efficient because the secondary market is a source of pricing information for it.