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THE STOCK EXCHANGE AND US
The New York Stock Exchange
Located at 11 Wall Street in lower Manhattan, NY City.
It’s by far the world’s largest stock exchange.
Financial Market
It’s a market place that allows people to buy and sell financial:
Securities (shares and bonds) Commodities (gold, silver, copper) Currencies (euro, dollar)
Financial markets are typically defined by having transparent pricing, basic regulations on trading, costs and fees.
Role of Financial Markets
Financial markets allow :
The raising of capital The transfer of risk The transfer of liquidity
Types of Financial Markets
Capital market which includes the stock market and the bond market
Commodity market which contains precious metal and agricultural
Money market
Role of Stock Markets
Allowing buyers and sellers of stocks to meet Raising capital for businesses Sharing the profit
The Difference Between a Capital Stock and a Bond
Bond: it’s a share of loan, companies can raise money by issuing
bonds. They will have to pay an interest and pay back the bondholders. Capital Stock: it’s the money invested in the business by its
founders.
Put very simply, stocks offer an ownership stake in the company and bonds are akin to loans made to the company.
Why do People Buy and Sell Stocks?
People buy shares because they think that the value of factory will increase and so the value of its shares.
They will have a dividend each year. They can buy shares at a low price and sell them
at a higher price.
Why do Stock Prices Change?
As people buy and sell shares, stock prices can change everyday.
When there is more buying, the stock prices rise. When there is more selling, the stock prices fall.
So, stock prices change due to the imbalance between buyers and sellers.
How Do We Measure the Stock Markets using indices?
We measure the stock market with an index :- CAC 40- Dow Jones- S&P 500
It’s an average of a specific group of stock prices.
Conclusion
We can conclude that stock exchanges have multiple roles in the economy:
- Raising capital for businesses- Mobilizing savings for investment- Facilitating company growth- Creating investment opportunities for small investors- Government capital-raising for development projects- It’s a barometer for the economy
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