Reinier C.

Alborque

BSA

FINMARK (1pm – 4pm)

1. Classify the following transactions as taking place in the primary or secondary markets:

a. IBM issues $200 million of new common stock. PRIMARY MARRKET

b. The New Company issues $50 million of common stock in an IPO. PRIMARY MARKET

c. IBM sells $5 million of GM preferred stock out of its marketable securities portfolio.
SECONDAY MARKET

d. The Magellan Fund buys $100 million of previously issued IBM bonds. SECONDARY
MARKET

e. Prudential Insurance Co. sells $10 million of GM common stock. SECONDARY

MARKET

2. Classify the following financial instruments as money market securities or capital market
securities:

a. Banker’s acceptances – Money market securities

b. Commercial paper – Money market securities

c. Common stock – Capital Market Securities

d. Corporate bonds - Capital Market Securities

e. Mortgages - Capital Market Securities

3. What are the different types of financial institutions? Include a description of the main services
offered by each.

Commercial Banks Institutions

A commercial bank can be defined as a type of financial institution which provides a wide range of
services such as mortgage lending, giving business and auto loans and accepting deposits. The
commercial bank also deals with basic investment products such as savings accounts and
certificates of deposit. The traditional commercial banks come with all facilities such as safe deposit
boxes, bank tellers, ATMs and vaults. However, there are some commercial banks that do not have
any physical branches. Here the customer is required to undertake all transactions either through the
Internet or by phone

Credit Unions Institutions

The Credit Union is known by various names across the world and is a member-owned, not-for-profit
financial cooperative. Unlike other banks and financial institutions, the Credit Unions are established
and operated by the members. In the Credit Union, the profits are shared amongst the members.
There is no set standard for the Credit Union. It can range from an organization with just a few
members to a large one where there are thousands of people. In the Credit Union the members pool
their money in the bank so that they can provide loan money to each other. Further, the profits that
are achieved are employed to fund projects and services for the overall benefit of the community.
Some of the services offered by the Credit Unions are online banking, share accounts (savings
accounts), share draft accounts (checking accounts), credit cards and share term certificates
(certificates of deposit).

Stock Brokerage Firms institutions

The stock brokerage firm is responsible for facilitating buying and selling of financial securities
between a buyer and a seller. A brokerage firm serves a clientele of investors and employs a
number of stockbrokers through whom they trade public stocks and other securities. Once a
transaction has been successfully completed the brokerage company receives compensation, which
is by means of a commission. Full-service brokerages offer estate planning services, tax advice and
consultations. A discount brokerage charges less money than the traditional brokerage and here
clients conduct trades via computerized trading systems. In online brokerages, the investor is offered
a website to conduct his or her transactions

Asset Management Firms institutions

An asset management company is beneficial as they provide the investors with more investment
options than they would have by their own as they have a much bigger pool of resources. The
company will invest the pooled funds of its clients into securities that match declared financial
objectives. Asset management companies manage hedge funds, mutual funds and pension plans.
They charge service fees or commissions and may either charge set fees or a percentage of the
total asset under management.

Insurance Companies institutions

The insurance company is one which signs a contract, which is represented by a policy, and
provides an entity or individual with financial protection or reimbursement against any losses that
may occur. The insurance company is instrumental as a means of protection of financial losses, both
major as well as small, resulted from damage to the insurer or his or her property. There are
numbers of insurance policies; however, the most important ones are health insurance, life
insurance, home insurance and vehicle insurance.

Finance Companies institutions

A finance company is defined as an organization that provides loans to businesses as well as
consumers. A finance company is similar to a bank as it acts as a lending entity by extending credit.
However, unlike a bank, a finance company does not accept deposits from people. In fact, finance
companies get their funding from banks and other resources. The role of a finance company is to
extend credit to companies for commercial use and to individuals to make various purchases. It may
also provide financing for instalment plan sales.

Building Societies institutions

A Building Society is defined as a financial institution that gives banking and other financial services
to its members. The Building Societies are owned by the members of a mutual organization.
Services offered by Building societies include mortgages and demand-deposit accounts. They are
often supported by insurance firms. The term Building Society dates back to the 19 th century

Commercial Banks Institutions

A commercial bank can be defined as a type of financial institution which provides a wide range of
services such as mortgage lending, giving business and auto loans and accepting deposits. The
commercial bank also deals with basic investment products such as savings accounts and
certificates of deposit. The traditional commercial banks come with all facilities such as safe deposit
boxes, bank tellers, ATMs and vaults. However, there are some commercial banks that do not have
any physical branches. Here the customer is required to undertake all transactions either through the
Internet or by phone.

Credit Unions Institutions

The Credit Union is known by various names across the world and is a member-owned, not-for-profit
financial cooperative. Unlike other banks and financial institutions, the Credit Unions are established
and operated by the members. In the Credit Union, the profits are shared amongst the members.
There is no set standard for the Credit Union. It can range from an organization with just a few
members to a large one where there are thousands of people. In the Credit Union the members pool
their money in the bank so that they can provide loan money to each other. Further, the profits that
are achieved are employed to fund projects and services for the overall benefit of the community.
Some of the services offered by the Credit Unions are online banking, share accounts (savings
accounts), share draft accounts (checking accounts), credit cards and share term certificates
(certificates of deposit).

Stock Brokerage Firms institutions

The stock brokerage firm is responsible for facilitating buying and selling of financial securities
between a buyer and a seller. A brokerage firm serves a clientele of investors and employs a
number of stockbrokers through whom they trade public stocks and other securities. Once a
transaction has been successfully completed the brokerage company receives compensation, which
is by means of a commission. Full-service brokerages offer estate planning services, tax advice and
consultations. A discount brokerage charges less money than the traditional brokerage and here
clients conduct trades via computerized trading systems. In online brokerages, the investor is offered
a website to conduct his or her transactions.

Services offered include Insurance, Securities, Mortgages, Loans, Credit cards, Money

market and Check writing.

Asset Management Firms institutions

An asset management company is beneficial as they provide the investors with more investment
options than they would have by their own as they have a much bigger pool of resources. The
company will invest the pooled funds of its clients into securities that match declared financial
objectives. Asset management companies manage hedge funds, mutual funds and pension plans.
They charge service fees or commissions and may either charge set fees or a percentage of the
total asset under management.

Insurance Companies institutions

The insurance company is one which signs a contract, which is represented by a policy, and
provides an entity or individual with financial protection or reimbursement against any losses that
may occur. The insurance company is instrumental as a means of protection of financial losses, both
major as well as small, resulted from damage to the insurer or his or her property. There are
numbers of insurance policies; however, the most important ones are health insurance, life
insurance, home insurance and vehicle insurance.
Services offered include Insurance services, Securities, Buying or selling service of the real
estates, Mortgages, Loans, Credit cards and Check writing.

Finance Companies institutions

A finance company is defined as an organization that provides loans to businesses as well as
consumers. A finance company is similar to a bank as it acts as a lending entity by extending credit.
However, unlike a bank, a finance company does not accept deposits from people. In fact, finance
companies get their funding from banks and other resources. The role of a finance company is to
extend credit to companies for commercial use and to individuals to make various purchases. It may
also provide financing for instalment plan sales.

Building Societies institutions

A Building Society is defined as a financial institution that gives banking and other financial services
to its members. The Building Societies are owned by the members of a mutual organization.
Services offered by Building societies include mortgages and demand-deposit accounts. They are
often supported by insurance firms. The term Building Society dates back to the 19 th century
England. It was introduced from groups of co-op savers in the building trade. Though mainly found in
the UK, building societies also exist in other countries such as Australia, Ireland and Jamaica.

Retailers institutions
A retailer sells goods directly to consumers with an aim of earning a profit. This is done through
various distribution channels. Retailers can vary in size ranging from small family operated stores to
big supermarkets. Large retailers buy directly from a manufacturer or wholesaler and then sell the
product to the end user at a marked up price. The retailers rarely manufacture their own product.
They mainly act as a link in getting the product from the wholesaler and selling it to the consumer.