Consumers Digest

God bless you guys ( for Finance major students or anyone who is smart in Finance)?

In a developed economy, financial transcations occur on a variety of markets. the following statements describe several common fianancial transactions. Indicate which one of the types of financial markets listed best describes the transaction. George uses on online brokerage account to buy 2000 shares of Heffernan Inc. Is it: 1. Money market. 2. Primary market. 3.private market 4.physical asset market 5.financial asset market a farmer agrees to buy 10000 bushles of wheat, at a price of $4.80 per hushel, six months from now. the transaction is commpleted using a requlated exchange, such as the Chicago board of trade. is it: 1.secondary market 2.money market 3.futures market 4.financial asset market 5.spot market Jerry's broker has told him that he may buy up to 10000 shares in farva Co.'s initial public offering (IPO) this week. is it: 1. private market 2. secondary market 3.primary market 4.physical asset market 5.money market Carol calls her broker and instructs her to immediately buy 500 shares of Tyson Co., which is traded on the NASDAQ exchange. 1. Physical asset market 2. Primary market 3. Capital market 4 Money market 5. Private market

Public Comments

1. Abosen: As the name implies, the "primary" market describes an exchange where stocks and bonds are sold for the first time - directly from the issuer to the investor. When George buys 2000 shares from his online broker, he's taking (what will surely be) temporary ownership of publicly available shares that have surely been bought and sold dozens, if not hundreds or thousands of times before. He's buying from a secondary market - in this case, one of the stock exchanges. The answer to that question is "2". When the farmer makes an agreement to purchase a commodity in the future - as the name again implies - he's dipping into the futures market. In a futures market transaction, the investor agrees to a contract to purchase a specific quantity of some commodity at a specified price, with delivery due at a future date. The answer to that question is "3". Jerry's getting an opportunity to buy freshly-minted stocks, directly from the company - it's a public IPO, so it's an opportunity that's theoretically available to any investor. He's purchasing on the primary market, as described above. The answer to this question is "3". The last question is a little bit of a trick question. Carol's situation is pretty much exactly the same as George's in question one. She, too, is buying resale stock on a public market. Notice, however, that secondary market, the answer to question 1, isn't one of the available choices here. Carol's not buying on the money market - that's a specialty market where short-term assets and lending instruments are bought and sold - all of these investments mature in one year or less. That's not a stock. She's not buying on the primary market, because she's not buying direct from the issuer. She's not buying on a private market, because Tyson is publicly bought and sold on a public market, the NASDAQ - you don't need special access to buy or sell. She's not buying in a physical asset market - I think that's obvious - she's buying imaginary shares of a company, not tangible machinery or goods. We're left with answer "3", the capital market - which is a general term for any securities market that deals in long-term securities - it can be either a primary or a secondary market - which, of course, is what Carol's purchase is - a purchase on the secondary market. Therefore, Carol's purchase can best be described as "3". I'm putting you down on my "I've done your homework one time" list. Good luck!