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MGTA01H3 (583)


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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

Ch 11 securities marketSecurities stocks and bonds which represent a securedassetbased claim on the part of investors that can be bought and soldoThe markets in which stocks and bonds are sold are called securities markets Primary securities markets the sale and purchase of newly issued stocks and bonds by firms or governments Investment banker any financial institution engaged in purchasing and reselling new stocks and bonds Some firms like RBC Dominion Securities and D Securities provide three types of investment banking services1 They advise the company on the timing and financial terms for the new issue2 By underwriting buying the new securities investment bankers bear some of the risk of issuing the new security3 They create the distribution network that moves the new securities through groups of other banks and brokers into the hands of individual investors Secondary securities the sale and purchase of previously issued stocks and bonds oShare values are expressed in two different ways as market value and as book value 1 Market value the current price of one share of a stock in the secondary securities market the real value of a share Market value current price of a share on the stock marketmarket price of a share can be influenced by both objective factors eg a companys profits and by subjective factors eg rumours investor relations and stockbroker recommendations2 Book valuetotal owners equitynumber of shares of stock book value is used as a comparison indicator because for successful companies the market value is usually greater than its book valueMarket capitalization the dollar value market valueof stocks listed on a stock exchange market capitalizationnumber of outstanding sharesthe value of each share dividends paiddividend percentstated value for preferred shareoThe issuing firm can require the preferred shareholders to surrender their shares in exchange for a cash payment known as the call priceoBecause of its preference on dividends preferred shares income is less risky than the common shares of the same company Moreover most preferred shares are cumulative
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