|Financial Management Section C |
|Homework 2: Integrated Case Questions |
Chapter 2 Integrated Case 2-11
A) In a well-functioning economy, capital flows efficiently from those with surplus capital to those who need it in one of three ways: • Direct transfers: occur when a business sells its stocks or bonds directly to savers without going through any type of financial …show more content…
F) The two leading stock markets are the New York Stock Exchange and the Nasdaq. Physical location exchanges are tangible entities that have their own building and an elected governing body called a board of governors. The exchange members will sell orders offer the shares for sale, and they are bid for by the members with buy orders. OTC markets are often referred to today as dealer markets, and include all the facilities that are needed to conduct security transactions, but not all are made on the physical location exchanges. The dealer market system consists of the relatively few dealers who hold inventories of securities and make a market for the securities, the thousands of brokers who act as agents in bringing the dealers together with investors, and the computers, terminals, and electronic networks that provide a communication link between dealers and brokers.
G) Since Varga is not purchasing the stock directly from Apple, but instead from Smyth Barry, who probably purchased it from Apple, she is dealing in a secondary market; the money she spends to buy the stock is not going directly to Apple, but to a second party. This would not be different if Varga purchased previously outstanding Apple stock in the dealer market, because in both situations she is not giving money directly to Apple, but buying stock that someone