TUTORIAL 01 SOLUTIONS

Module: BUS148 Capital Markets and Securities

ACTIVITY 1
FROM THE FINANCIAL TIMES
Read the article “Virgin Atlantic plans London stock market listing”
https://www.ft.com/content/bc759a50-5e0e-4a23-9034-03b13ecda942 and prepare the
following questions for discussion.
1. How is Virgin Atlantic planning to raise new funds?
By selling stocks via a new listing (IPO) on the London Stock Exchange.
2. Why have they chosen to raise funds in this manner at this particular point in time?
Recovery of the leisure industry from the Covid pandemic suggests there will be greater
investor interest and the firm could achieve a favorable stock price.
3. Companies in which other sectors might benefit from raising funds in this way? Why?
Other companies in the leisure industry such as those specialising in the travel, hotel and
restaurant industries.
4. What is another way that Virgin Atlantic could raise funds? Explain.
By issuing corporate bonds.
5. Given a scenario of economic recovery from the Covid pandemic and the expectation of
increasing interest rates, what actions might you take as an investor?
With increased confidence in the economy and markets, an investor might consider riskier
investments that will yield a higher return. Choice of investments will partly depend on
many factors, including the investor’s level of risk aversion.

ACTIVITY 2
Are the following statements true or false? Explain your answer.

1. American investors pay attention to only the Dow Jones Industrial Average.
Answer: FALSE
2. Many common stocks are traded over the counter, although a majority of the largest
corporations have their shares traded at organized stock exchanges.
Answer: TRUE
3. The capital market is a financial market in which only short-term debt instruments
(generally those with an original maturity of less than one year) are traded.
Answer: FALSE
4. Every financial market allows loans to be made.
Answer: FALSE
5. A bond denominated in euros and issued in a country that uses the euro as its currency is
an example of a Eurobond.
Answer: FALSE