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Investment Chap2

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Chapter 2
Markets and Transactions
T Outline
Learning Goals
I. Securities Markets A) Types of Securities Markets 1. The Primary Market a. Going Public: The IPO Process b. The Investment Banker’s Role 2. Secondary Markets B) Organized Securities Exchanges 1. The New York Stock Exchange a. Trading Activity b. Listing Policies 2. The American Stock Exchange 3. Regional Stock Exchanges 4. Options Exchanges 5. Futures Exchanges C) The Over-the-Counter Market 1. New Issues and Secondary Distributions 2. The Role of Dealers 3. Nasdaq 4. Alternative Trading Systems D) General Market Conditions: Bull or Bear Concepts in Review II. Globalization of Securities Markets A) Growing Importance of International Markets B) International Investment …show more content…

A related issue is the existence of after-hours trading. In the next section, various regulations applicable to brokers, investment advisors, and stock exchanges are described. The instructor need not dwell on this section at length, however the instructor might want to bring in any recent litigation or securities market trial that is being widely covered by the press. Ethical issues and insider trading are interesting and serve to make a point about the challenges facing those attempting to regulate the exchanges.

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Chapter 2

Markets and Transactions

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The text now moves to the different types of transactions, beginning with long purchases. The next section deals extensively with margin trading, including the magnification of profits and losses, initial and maintenance margin, and the formulas for their calculation. There are a number of review problems and a case at the end of the chapter to aid the student in understanding the concept of margin. The final section of the chapter deals with short selling, including the mechanics and uses of short sales.

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T Answers to Concepts in Review
1. (a) In the money market, short-term securities such as CDs, T-bills, and banker’s acceptances are traded. Long-term securities such as stocks and bonds are traded in the capital markets. (b) A new security is

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