Question

Secondary markets for financial securities:

Question 4 options:

	are an important source of funding for companies.
	are not important, since they don't bring in funds to companies.
	are important, since they provide information about the price investors will be willing to pay if the company issues new bonds or equity.
	are important, but only for the savers who hold the securities.

You lend $50 to a friend. You agree that she will pay you back with interest in 2 years. The interest rate will be 8%. This means that in 2 years, she will pay you:

Question options:

	$54
	$58
	$58.32
	$108

Answer 1

4. Option d is the answer.

• Secondary market for financial securities are important, but only for the savers who hold the securities.
• Secondary market is a part of financial markets in which buying and selling of bonds are carried out among investors. There are no direct involvement for the stock issuing companies. The profit or loss associated with these securities are affected on the investors and not the stock issuing company. Secondary market sells the bonds, securities, etc which are previously issued in the financial markets.

5. Option b is the answer.

• $58 Is the total amount after 2 years.
• Here, principal  amount,P = $50
• Number of years ,N= 2 years
• Interest rate,R = 8% = 8÷100 = 0.08
• Simple interest formula= PNR = 50 * 2 * 0.08 = $8
• In 2 years, the payment = $50 + $8 = $58