A) Provide an example of a situation where you have acted as a demander of capit

Question

A) Provide an example of a situation where you have acted as a demander of capital and discuss whether this has been through a financial intermediary or a financial market.

b) Discuss why the secondary markets are critical to firms who want to raise capital given that firms raise capital in the primary markets and not the secondary markets. To get full credit, you need to clearly explain your answer. Note that while there is more than one viable reason, you need to only address one reason – just address it well.

Explanation / Answer

A)An example of a situation where I have acted as a demand of capital. In the situation the capital had to be raised through financial market by offering stocks to public in the primary market. Where the underwriting firm help to determine the type of security to issue, Offering Price, amount of share and duration of the market offering.
The Organisation was valued at rupees $150000 and it was divided into 50000 shares. Therefore the per share value becomes $3 per share. The underwriter sold 25000 shares to the public. And 25000 shares was kept with company hence $75000 could be used for companies expansion plans.

B) The secondary market determines the market sentiment regarding the organisation. And the company value is determined by the volume traded which eventually affects the stock price hence secondary markets are critical to firms who want to raise capital.

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