ASSIGNMENTS

4. Distinguish between primary and secondary markets? Distinguish between

money and capital markets? Distinguish between debt market and securities
market?
- Distinguish between primary and secondary markets:
Primary markets Secondary markets
- New securities are sold to the - Securities are exchanged among investors
public for the first time - Price is fluctuated based on the issuers
- Investors are able to purchase performance, the market sentiment, the
securities directly from the issuer economic and industrial situation, etc.
Initial public offering (IPO) National Stock Exchange (NSE)
Private placement New York Stock Exchange (NYSE)
Rights issue London Stock Exchange (LSE)
Referred allotment Ho Chi Minh Stock Exchange
(HOSE)
- Distinguish between money and capital markets:
Money markets Capital markets
Where short-term debt (mature in ≤ 1 year) Where long-term securities (mature
are exchanged. in ≥ 1year) are exchanged.
Treasury bill Treasury bond
Repurchased agreement Municipal bond
Commercial paper Corporation bond
Negotiable certificates of deposit (NCDs) Common Stock
Banker acceptances
- Distinguish between debt market and securities market:
Debt market Securities market
Where debt securities are exchanged Where equity securities are exchanged
Treasury bill Common stock
Treasury bond Preferred stock
Municipal bond
Corporation bond
 Repurchased agreement
Commercial paper
5. What is the basic principle in determining the valuation of a financial asset?
By the nature of claims:
- Debt securities: Holders are the lenders of Issuer
- Equity securities: Holders share the ownership with the Issuer
By the maturity of the financial assets:
- Mature in a year or less
- Mature in more than a year
6. What is the role of information in evaluating financial assets? What is
Asymmetric Information problem?
The value of a security is depend on the expected cash flow to investors in the future,
which is uncertainty and affected by the related information of that cash flow
What is Asymmetric Information problem?
Definition: Asymmetric Information happens when a party in the transaction has more
information than the others.
Consequence of Asymmetric Information could be:
- Moral hazard
- Poor investing decisions
Ex: WorldCom crisis in 2001-2002 largely contribute by asymmetric information