Question

Contrast the different types of financial markets and brokers used in investing. Be sure to address primary vs. secondary, broker-dealer markets, and types of brokersAssume you purchased a stock for $40.00 last year. Over the year, its price increased to $42.00 and it paid a dividend of $1.50. What is the total return? Capital gain return and income return?

Answer 1

FINANCIAL MARKETS

FINANCIAL MARKETS CAN BE CATEGORISED AS CAPITAL MARKET & MONEY MARKET

CAPITAL MARKET IS A PLACE WHERE MONEY COMES FOR A LONGER PERIOD ONLY.

E.G., ANY COMPANY COMES OUT WITH PUBLIC ISSUE, WILL KEEP MONEY FOR INFINITE PERIOD, AS WE BELIEVE IN GOING CONCERN CONCEPT, AND COMPANY HAS PERPETUAL SUCEESSION

MONEY MARKET IS A MARKET WHERE MONEY COMES FOR AN OVERNIGHT TO A MONTH OT MAXIMUM FOR A YEAR.

E.G., TREASURY BILLS ARE OF 1 WEEK TO 360 DAYS.

BESIDES THESE 2 MARKETS, WE HAVE DERIVATIVES MARKET, WHERE BUSINESS MEN, COMPANIES ETC COME & HEDGE THEIR POSITIONS.

WE ALSO HAVE COMMODITY MARKETS, WHERE WE CAN BUY COMMODITIES ON FORWWARD & FUTURE & OPTION BASIS, CAN ALSO BE TERMED AS PART OF DERIVATIVES MARKET

HPR = HOLDING PERIOD RETURN

HPR = (P1+D1-P0)/P0 *100 = (42 + 1.5-40)/40*100 = 8.75%

GO THROUGH. GIVE POSITIVE FEEDBACK. ANY DOUBTS, FEEL FREE TO ASK