RSM230H1 Chapter Notes - Chapter 10: Initial Public Offering, Capital Market, General Obligation Bond
31 Dec 2017
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Firms and individual use the capital markets for long-term investments. Firms and individuals use the money markets primarily to warehouse funds for short period of time until a more important need or a more productive use for the funds arises. If long-term securities, such as bonds or stock, had been used, the increased interest rates would not have been as critical. The primary reason that individuals and firms choose to borrow long-term is to reduce the risk that interest rates will raise before they pay off their debt. The primary issuers of capital market securities are federal and local governments. The distributions its capital structure on of a firm"s capital between debt and equity is its capital structure. The largest purchasers of capital market securities are households. Capital market trading occurs in either the primary market or the secondary market. The primary market is where new issues of stocks and bonds are introduced.
