1.

“Corporations do not gain any funds from the secondary markets, therefore these
markets are not in their interests”. Do you agree with it?’
Answer: The existence of the secondary market makes their stock more liquid and the price
in
the secondary market sets the price that the corporation would receive if they choose to
sell more stock in the primary market.
https://quizlet.com/70504674/
No, because:
The secondary market provides a good mechanism for a fair valuation of a company.
Secondary markets help in analyzing the economic health of a company.
The stock price in these markets helps in evaluating a company effectively.
Secondary markets face heavy regulations from the government as they are a vital
source of capital formation and liquidity for the companies and the investors.
It helps the company to monitor and control public perceptions.
Signal for the company how it seems as a mean of investment.
The price in the primary market is determined by prices in the secondary market.
What companies gain from the primary market? Funds, capital
The primary market is where securities are created, while the secondary market is
where those securities are traded by investors.
In the primary market, companies sell new stocks and bonds to the public for the
first time, such as with an initial public offering (IPO).
The secondary market is basically the stock market and refers to the New York
Stock Exchange, the Nasdaq, and other exchanges worldwide.
https://www.investopedia.com/investing/primary-and-secondary-markets/

No. Without securities trade the capital market would be harder to navigate and less
profitable. Primary market refers to the market where securities are crested, while
secondary market is one in which they are traded among investors
In the primary market, companies sell new stocks and bonds to the public for the first
time, such as with an initial public offering (IPO).
The secondary market is basically the stock market and refers to the New York
StockExchange, the Neasdaq, and other exchanges worldwide.

2. What are the functions of capital markets? Pytanie na kolokwium wypisz 4 i opisz 2
• Capital allocation - from borrowers to lenders, from investors to companies
• Transformation - we can transform short term capital into long term profit
• Valuation - process of determining the fair value of an asset or a firm
• Information - we learn a lot about market, companies, capital market is sort of information
 It acts in linking investors and savers
 Facilitates the movement of capital to be used more profitability and productively to
boost the national income
 Boosts economic growth
 Mobilization of savings to finance long term investment
 Facilitates trading of securities
 Minimization of transaction and information cost
 Encourages a massive range of ownership of productive assets
 Quick valuations of financial instruments
 Through derivative trading, it offers insurance against market or price threats
 Facilitates transaction settlement
 Improvement in the effectiveness of capital allocation
 Continuous availability of funds
https://www.karvyonline.com/knowledge-center/beginner/capital-market-and-its-types
Transformation, information, valuation, ...
This is the base of data.
Facilities movement of capital to be used more profitable and productively to boost
national income
Boost economic growth
Improve transactional effectiveness, bring suppliers together with those who seek capital
and place where they can exchange securities
Promotes Saving Habits
Minimization of transactions and information cost
Capital market is where both equity and debt instrument like equity shares, preference
shares, debentures, bonds, etc. are bought and sold.
Functions of Capital Market:
 It acts in linking investors and savers.
 Facilitates the movement of capital to be used more profitability and productively
to boost the national income.
 Boosts economic growth.
 Mobilization of savings to finance long term investment.
 Facilitates trading of securities.
Financial markets provide a sign for the allocation of funds in the economy based on the
demand and supply through the mechanism called the price discovery process.
https://www.assignmentexpert.com/homework-answers/economics/other/question-
201017
GDP and stocks goes wprost proporcjonalnie.
Decrease in stock markets shows information about economy, it’s developing or not.
Creates risk but profitable financial innovations
derrivatives

3. Why do companies consider foreign IPO?

Foreign IPOs would help increase the supply of equities on U.S. stock exchanges and bring
in more foreign investors, helping boost the U.S. IPO market (liquidity, encourage domestic
ipo activity, increase ipo fee activity, etc.).
https://www.karvyonline.com/knowledge-center/beginner/benefits-of-ipo
One of the key advantages is that the company gets access to investment from the entire
investing public to raise capital. This facilitates easier acquisition deals (share conversions)
and increases the company’s exposure, prestige, and public image, which can help the
company’s sales and profits.
When a company decides to raise money via an IPO it is only after careful consideration and
analysis that this particular exit strategy will maximize the returns of early investors and raise
the most capital for the business. Therefore, when the IPO decision is reached, the
prospects for future growth are likely to be high, and many public investors will line up to get
their hands on some shares for the first time. IPOs are usually discounted to ensure sales,
which makes them even more attractive, especially when they generate a lot of buyers from
the primary issuance.
More importantly, an active IPO market serves a social purpose by permitting the public,
including persons who could not qualify to invest in private equity funds, to invest in new
growth companies.
https://www.investopedia.com/terms/i/ipo.asp
Foreign IPO - COMPANY decides to do the IPO in not their own country.
Gain more founds, more money, when they need foreign currency (when in their own country
is a crisis, when national currency have an down, when you are involved in foreign exchange
- you avoid exchange of currency), foreign investors know you better - especially important
when you consider entering this market, prestige, some sort of advertising, if big company
want to go into IPO but local market is too small so there is a problem so investors wouldn't
want to invest in this company so company goes into foreign IPO - given additional possibility
to rise
To get more funds, more money
Crisis in own country
Plan to go abroad
Advertisement in this country before entering the market
Sounds prestigious
Want capital in foreign currency
4. What determines a stock's price?
Generally speaking, the prices in the stock market are driven by supply and demand.
This makes the stock market similar to other economic markets. When a stock is sold, a
buyer and seller exchange money for share ownership. The price for which the stock is
purchased becomes the new market price. When a second share is sold, this price becomes
the newest market price, etc.
https://www.investopedia.com/ask/answers/how-companys-stock-price-and-market-cap-

Supply - number of company

Demand - number of investors
Expectation of the investors.
Unexpected events, interest rate, and inflation rate (high i.r. the higher expectation and
inflation accordingly; the lower i.r. the performance is lowered and investors are looking for
something new)
Capital rotation, transformation, information
Capital rotation, transformation, information
Supply (number of companies)
Demand (number of investors)
Crisis
What sell the company
Investors expectations
Interest rate
Inflation rate
Unexpected events

5. What are differences between common and preferred stocks?

Preferred vs. Common Stock

 The main difference between preferred and common stock is that preferred stock gives no
voting rights to shareholders while common stock does.
 Preferred shareholders have priority over a company's income, meaning they are paid
dividends before common shareholders.

6. What are the reasons to issue preferred stocks?

Companies issue preferred stock as a way to obtain equity financing without sacrificing voting
rights. This can also be a way to avoid a hostile takeover. A preference share is a crossover
between bonds and common shares.
7. What should an investor consider before investing in stocks?

Strategy of the company, inflation rate (general market situation), ROI, possible changes in fiscal
policy, size of the company, time horizon (short or long term), revenue growth,

8. List 5 important facts about Warsaw Stock Exchange and 3 important facts about your national
stock exchange.

 The Warsaw Stock Exchange (WSE) was founded in 1991 following the overthrow of
Poland's communist regime three years earlier.
 The WSE is the biggest exchange in Central and Eastern Europe.
 It operates a financial market and a commodities market.
 The Warsaw Stock Exchange (commonly known as the WSE) operates two principal
markets for trading in financial instruments: The Main Market, which is the WSE's
regulated market.
 As of April 2021, there were 432 companies listed on the exchange's main and parallel
markets
 The trading system used on the WSE is order-driven, which means that prices of
securities are determined based on buy and sell orders.