13) The sale of a new security directly to an investor or a group of investors is called A) the secondary market B) the primary market C) the capital market D) the private placement market
14) The ________ market is where securities are initially issued and the ________ market is where pre-owned securities (not new issues) are traded. A) primary; secondary B) money; capital C) secondary; primary D) primary; money
2.3 Describe the differences between the capital markets and the money markets.
1) The Over-the-Counter (OTC) exchange is not an organization but an intangible market for trading securities which are not listed by the organized exchanges.
2) Unlike the organized exchanges, the OTC makes a market in both outstanding securities and new public issues, making it both a secondary and a primary market.
3) In the OTC market, the ask price is the highest price offered by a dealer to purchase a given security.
4) In the OTC market, the prices at which securities are traded result from both competitive bids and negotiation.
5) Capital markets are for investors who want a safe temporary place to deposit funds where they can earn interest and for borrowers who have a short term need for funds.
6) Money markets are markets for long term funds such as bonds and equity.
7) An efficient market is a market that allocates funds to their most productive use as a result of competition among wealth-maximizing investors.
8) Money markets involve the trading of securities with maturities of one year or less while capital market involve the buying and selling of securities with maturities of more than one year.