Capital Markets

LinkedIn Course
• Shrinking US Stock Market
• 1998 – 10,000 companies listed
• 2018 – 4,000 companies listed

Reason
- Large Companies buying small
- Less companies going public

Regulatory Bodies
• SEC – Security and Exchange Commission
• Inform and protect investors
• Facilitate Capital Information
• Enforce federal security laws
• Regulate Security Market
• Provide data for valuating and trading purpose

• FINRA – Financial Industry Regulatory Authority

• Regulate industry
• Stock brokers and industry professionals are acting in best interest of Investors

• CFTC – US Commodity Futures trading commission

• Commodity contracts, futures contracts and other assets like cryptocurrency are handled by CFTC
• ADR or American Depository Receipts - foreign firms trading in the U.S.

STOCK MARKET
• Capital Market = Stock Market + Bond Market
• Pre Market trading – Is the price adjustment of stock and index before market open compare to
previous day close. Pre Market trading is done by Institutional Investors specially via futures
• BID ASK Spread – Difference bid price and ask price of the stock. The more bid ask spread less
volatile the stock.
• Mutual Funds VS ETF
Mutual Fund ETF
Common choice made by people Basket of stocks trade through Exchange
investing on their own
Pools the money, Managers pick the Fraction of share of number of shares
stocks based on analyses
STOCK MARKET Continued
• Valuation of common stock
Expected Dividend / ( Required rate of return – Growth Rate)
Growth Rate
Last year Revenue and Current Year revenue
See below Microsoft example while trading at Current Market Price of $150
Bonds
• Characteristics
• Par Value – Face Value of bond returned to investor at maturity
• Price – Percentage of face value or par
• Coupon – Interest payment on bond at percent of face value
• Maturity – Length of the time bond is issued and when the issuer pays the par
value to investor
• Yield- Rate of return bond holder will earn comparing coupon by price paid.
Bonds Continued
• Bond Ratings – Reflects the future potential risk
• Agency – S&P, Moody’s and Fitch
• High risk bonds are also called as Junk Bonds. They pay high yield

• Bond Valuation
Bonds Continued
• Bond Yield Calculation – Bond Yield is inversely proportional to Price of the bond
Bonds Continued
• Buy Treasury Bills, Notes and Bonds from US Treasury Govt Website
No Federal Income tax on Municipal Bonds, Yields are less and safe form on investments
Getting more Yen using Triangular Arbitrage