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19 Cards in this Set
- Front
- Back
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Primary market
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IPOs
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Secondary Market
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All transactions after IPO
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Money Market
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short term, Treasury bills
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Capital Market
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Long term, Corporate stocks, NYSE
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Exchange Market
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Markets with tangible location
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OTC Market
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NASDAQ, no tangible location
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k*
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Tbill = k* + IR
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IR
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= to inflation
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MP
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T bonds = T bills + MP
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DRP
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AAA corp = T bonds + DRP
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Sole Propietorship
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- Get all the profits
- Subject to little govt reg - Unlimited liability - Short business life |
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Partnership
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- Easier to raise capital
- Tax is same as sole prop - difficult to transfer ownership - Unlimited liability |
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Corporation
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- Limited liability
- Easy to raise capital - Double taxation - More complicated |
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Corporate Goals (3)
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Maximize profits
Maximize shareholder wealth Expand |
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Agency issue how to solve?
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- External threat of takeover
- External experts in BOD - same incentives for management as shareholders |
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Axioms
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- risk return
- Time Value of money - Cash flows matter - Efficient markets - Agency problem - Taxation is Important - Diversifiable risk - Ethical behavior of Managers |
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Why does the fed tax?
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- Gain revenue
- Achieve goals - Economic stabilization |
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Capital transfer through IB
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- such as merril lynch
- Buy stocks for business, sell them to investors. - act as middlemen |
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Capital transfer thru FI
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- Commercial banks
- Credit unions - Do more than simply transfer funds - Provide interest, return, other income |
