Summary of chapter 10 - Essay Example

Securities Markets: Trading Financial Resources Securities markets are economical s where there are effective conditions that allow sales and purchases transactions to occur. These markets transfer bonds and stocks from owners to willing buyers. For these transactions to take place, the markets need financial resources and instruments such as bonds and stocks to seal the transaction. A bond is a security establishing right to property that the government entity issues. The holder can sell it to other investors before they reach maturity.

In addition, the firm that issues it has to pay interest until the moment that the bond matures. This is unlike the case in dividends on stock; thus, stockholders are less likely to acquire financial returns as compared to bondholders (Kelly & McGowen 135). Trading securities markets are of two types; primary and secondary markets. Primary securities market refers to when corporations gain more financial capital by selling new securities (Kelly & McGowen 137). On the other hand, secondary securities market trades the previous securities to gain financial capital.

Issuing of securities in the primary market occurs in two methods, that is, through a public offering or private placements. Private placements are faster, easier and cheaper as compared to a public offering (Kelly & McGowen 138). In the secondary market, the firms that issue bonds and stock do not receive additional finance when they trade their securities. However, an advantage to the firm is that, at secondary market price, of their stock reflects the investor opinion about the firm’s management (Kelly & McGowen 138).

Investors need to keep track on the performance of securities in the market. A major way is to track stock indices. These include; Dow Jones Industrial average, Standard and Poor’s 500 and the NASDAQ Composite Index. These indices help to update the investor and guide him or her in the way of investing (Kelly & McGowen 147). Work sitedMarce, Kelly. & Jim, McGowen. BUSN 5. New York: Cengage Learning, 2012. Print.