B A 323 Chapter Notes - Chapter 2: Money Market Fund, Spot Market, Financial Intermediary
Document Summary
Direct transfers - occur when a business sells its stocks or bonds directly to savers, without going through any type of financial institution. Business delivers its securities to saves, who in turn, give them firm the money it needs. Used mainly by small firms and relatively little capital is raised. Indirect transfers through investment bankers - underwrites the issue and facilitates the issuance of securities. Company sells its stocks or bonds to the investment bank, which then sells these same securities to savers. Businesses" securities and the savers" money merely pass through the investment bank. Investment bank buys and holds the securities to savers for a period of time, it is taking a risk. Primary market transaction - new securities are involved and the corporation receives the sale proceeds. Indirect transfers through a financial intermediary - transfers can be made through a bank, an insurance company, or a mutual fund. Obtains funds from savers in exchange for its securities.
