Capital Market Questions

1. What are financial markets?

Financial markets are the mechanism through which financial assets (such as stocks , bonds ,
and futures ) are exchanged between re economic agents and the place where their prices are
determined (it does not have to be a physical place). Its function is to mediate between people
who save and people who need financing, that is, between buyers and sellers.

2. Who is the supply side? What are they called?

They are those that have aggregate savings (retirement funds, pension funds, insurance funds)
that can be used in favor of demand and in addition, in an economy there are different
economic agents such as families, companies and the public sector.

These types of agents that generate savings are called SURPLUS UNITS and they are the ones
that will offer this savings in the financial market with the aim of increasing their consumption
possibilities in the future.

3. How are these investors classified? and what are their differences?

They are classified into:

 Individuals: families and/or companies that manage their own investments

 Institutional: dedicated to the administration of funds received from third parties.

The difference is that individual companies only manage their own investments, while
institutional companies are governed by the administration of funds they receive from third
parties.

4. Who are the main institutional investors?

Banks, pension funds, investment companies, insurance companies,

5. Who is the demand side? What's it called?

They are those who need cash flow, those who need interim financing and those who need
long-term funds for business projects or infrastructure.

These types of agents are called DEFICIT UNITS and are those that will demand the
savings from the surplus units to cover their deficit.

6. What role do financial assets play?

They are the vehicles that allow the units' savings to be channeled surpluses towards the
financing needs of the deficit units.

7. What is the Banking Market?

They are financial entities that carry out an intermediation activity, receiving deposits from
surplus units and granting loans from deficit units that require financing.

8. Who are between the demand and supply of the Banking Market? Who are they?

There are the deficit units, the surplus units and the intermediaries.

The deficit units are those that will demand the savings from the surplus units so that they
can cover their deficits.

The surplus units are those that will offer this savings in the financial market.

The intermediaries are the ones who decide to which deficit units the savings of the
surplus units are allocated.

9. What is the Capital market?

The capital market, also called the stock market, is a type of financial market through
which medium and long-term funds or means of financing are offered and demanded.

The main purpose of this type of market is to act as an intermediary, channeling new
resources and investors' savings, so that issuers can then carry out financing and
investment operations in their companies.

10. What is a financial asset?

A financial asset is a financial instrument that gives its buyer the right to receive future income
from the seller, that is, it is a right over the real assets of the issuer and the cash they generate.
They can be issued by any economic unit (company, Government, etc.). Which are also called
negotiable securities.

11. What word do I associate with the primary market?

Issuance and placement of financial assets called negotiable securities.

12. Who participates in the primary market?

Intermediaries participate and offer their advisory services so that the loss-making units can
issue and place marketable securities among the surplus units.

13. What word do I associate with the secondary market?

Quotation and negotiation of negotiable securities.

14. What is traded in the secondary market?

Dedicated to the purchase and sale of securities that have already been issued in a first public
or private offering, in the so-called primary market.

15. Who participates in the secondary market?

Entities, companies or banks that need quick financing participate, issuing debt securities such
as bonds or risk securities such as stocks. The purchase of securities in the secondary market
can be done directly or through a financial intermediary. The purchase conditions are freely set
between the client and the entity, and may differ from one entity to another.

16. What function does the Stock Broker Company perform?

The SAB or Sociedad Agente de Bolsa is the only stock market intermediary authorized and
supervised by the Superintendency of the Securities Market (SMV) , in charge of carrying out the
purchase and sale operations that investors request of them; In exchange, they charge a
commission, which is freely determined by each of them in the market.

17. What function does the Securities Market Superintendence fulfill?

It is a public institution whose purpose is to promote the securities market, ensure

transparency, correct price information and investor protection. Likewise, it is responsible for
issuing rules that regulate the securities market.

18. What is CAVALI?

It is a special corporation whose purpose is to register securities that have been converted into
computerized records or account entries and to carry out the settlement of operations carried
out on the Lima Stock Exchange.
19. When the surplus units give up their savings, what will they be demanding from the
deficit units?
They give up their savings or their surplus when they want to earn more money, which is why
these surplus units give their savings to financial institutions, which in the long run really
compensates in the form of interest that the surplus units will earn.
20. What is the relationship between profitability and risk?

As in any investment , profitability and risk move in the same direction, so to aim to obtain a
higher return you must be willing to assume a greater risk, and, on the contrary, if you want to
reduce the risk to a minimum expression, the expected profitability will also be reduced.
21. What is the relationship between the real economy and the capital market?
There is a relationship of complementarity and not competition.

22. What is the profile of an investor?

The profile of an investor is defined by the relationship that exists between the risks they are
willing to assume and the returns they expect to obtain. Thus, we can talk about investors with
a conservative , medium or risky profile.
23. What are the steps to invest in the capital market?
1. Account opening
2. Order to the intermediary
3. Confirm operation
4. Settlement
24. Does the risk remain within the balance sheet of the intermediary or the investors?
It remains within the investors' balance sheet since they are the ones who make the
decision and the risk of what? They have to invest.
Who chooses whether to buy or not to buy?
Choose the investor, since he will know if it is feasible to buy or not buy a certain good or
service, or if it is feasible to invest in securities with greater risk.
25. What are actions?

It is defined as a movable or movable security that represents a proportional portion of the

share capital that makes up a corporation.

26. Type of actions:

1. Released action
2. gold stock
3. Privileged or preferred stock
4. new action
5. Non-voting action
27. What are bonuses? Depending on the issuer, it is classified as:

A bond is an asset or financial instrument; It is a security that represents a claim in favor of its
holder, and a debt with respect to its issuer.

According to ISSUER it is classified as:

 PUBLIC BONDS (from the central government):

 PRIVATE BONDS (issuing company)
28. For what purpose is the Central Government issuing a bond? And how is it classified?

With the purpose of raising funds for programs of national interest. They are classified into:

 Simple
 Unpaid
29. The bonds of an issuing company can be:
 Simple
 Convertibles
 Eurobonds

30. Difference between bonds and stocks?

The shares are the owner of the company's assets, while in the case of owning a bond or
obligation , only part of the debt of the company or issuing entity is acquired or purchased.

31. Can bonds be converted into stocks and stocks into bonds?

Convertible bonds in a first phase behave the same as a simple bond, however the contract
stipulates the possibility or obligation of converting the bond into shares at a certain time. The
holder of the convertible bond (the saver who has invested in the product) has the right to
convert the product for a certain number of shares of the issuer in those so-called
"cancellable" periods. If the return associated with the issuer's share is lower than that of the
bond, the holder will keep the bond in his possession while if it is higher, he will convert the
bond for the number of shares agreed upon in the contract.

But stocks cannot be converted into bonds.

32. What is the Lima Stock Exchange?

It is a private company that facilitates the negotiation of securities listed on the Stock
Exchange, offering participants (issuers and investors) the appropriate services, systems and
mechanisms for investment in a fair, competitive, orderly, continuous and transparent
manner.

33. For each transaction (purchase and sale) the investor must pay commissions: If they
must pay - what are they?

You must pay under the following concepts:

 Lima Stock Exchange (LSE)

 Securities Clearing and Settlement Institution (CAVALI)
 Securities Market Superintendence (SMV)
 Contributions to the guarantee fund and the liquidity fund.
 Stock Broker Company (SAB)

34. What are the steps to open an account at the BVL?

 Fill out the application on the website
 Fill out the W-8BEN form
 Three copies of passport or identification document
 Send the capital via transparency or transfer
35. What is the minimum amount to invest in the BVL?

There is no minimum amount to start investing, but keep in mind that for each purchase and
sale of securities you make you must pay an intermediation commission, which may vary the
profitability you want to achieve.

36. What is the benefit of investing in the BVL for the investor?

You have access to a wide variety of investment options. This means that the stock market
offers a variety of financial instruments (stocks, bonds and others). These securities vary in
profitability, liquidity, and risk, depending on the company that issues the security (issuer) and
market conditions.

37. What is the benefit of investing in the BVL for the company?
 Better company management
 Better long-term prospects
 Better financing costs
 Greater prestige and exposure in the market
38. What is the risk of investing in the Capital Market?

Not earning as much as expected or losing some of the money invested

39. What are the risk factors in the Capital Market?

 Risk country
 Economic sector risk
 Market risk
 Company risk
40. Free (What are Stock Market Transactions)

They are the processes by which financial instruments are bought and sold on stock exchanges
spread throughout the world, among them the most important are the New York, London and
Tokyo stock exchanges in which the most influential companies on the planet move the
world. .