ECON 132A Lecture Notes - Lecture 3: Financial Asset, Index Fund, Shares Outstanding
Document Summary
Only tested on what we have covered in class (cid:1) Primary: new issue of shares are created/sold, issuer (company selling the shares) receives proceeds from sale. Secondary: existing owner sells to another party, issuing firm doesn"t receive proceeds since it"s not directly involved. Market order: execute immediately at best price: bid price: price at which dealer will buy security, ask price: price at which dealer will sell security, will get executed, but not sure what price (best available, not recommended. If you believe a stock is going to decrease, then you sell some today and buy it back in the future. But you don"t own them, so you have to borrow from a broker. You sell at 100, and the share falls to 70. Priced on net asset value (nav): assets minus liabilities per share. Benefit: professional management, diversification and divisibility, lower transaction cost. Load: sales commission charged on mutual fund: misconception that load funds perform better than no-load funds.
