AFM121 Lecture Notes - Lecture 1: Initial Public Offering, Trimark Pictures, Banana Republic

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Intro: vital function of financial markets, help facilitate transfer of capital: Those who have extra wealth give to those who require capital: question: why would those who have extra wealth / capital transfer it to those who require it, 3 components of wealth transfer process: Financial instruments (what is actually bought / sold); Financial markets (facilitate buying / selling of #1); and. Individuals (you and me: corporations, governments, how is capital utilized / transferred / invested?, direct investment: assets that generate wealth (land, real estate, equipment. Stocks: bonds, companies and governments issue these financial assets and receive funds. They then take these funds and invest the funds directly. Investors buy these financial assets to generate a return (ie. make more money than originally invested: capital is mobile, scarce and se(cid:374)siti(cid:448)e . Those who have capital will only transfer / invest it if it is easy, cheap and generates a good return.

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