a. Three primary ways in which capital is transferred between savers and borrowers: b. The place where assets can be bought or sold is considered as market. Also there are many types of financial (financial product markets) other than physical asset markets. Physical market has tangible assets like machine, real estate, products etc. while financial markets claim to have a part in that assets which can be traded at the exchanges (i.e. financial markets). Spot markets are the place where assets are bought and sold in the market on spot with delivery while future markets are the place where in participants agree to buy at a future date. Money market is the market where securities are traded with less than one year maturity (i.e. short term) while long term securities trades in capital market. Primary markets is the market wherein companies/corporations raise money by issuing new securities while in Secondary markets, these securities are being traded by investors which are already issued A Private market is a place where in transaction takes place between two investors or two parties directly, while Public Market is a place where there are standard contracts trading at market place available to multiple investors. c.Healthy economy is depended on fund transfers from its citizens. Without the transfer of money economy can not function effectively. Economic development is related with the development and efficiency of financial markets. Economic transfers are necessary to run the financial markets so that companies can grow and hence economy. d. The financial asset whose value can be defined by any other underlying asset is Derivatives. Majorly they are used to reduce risks. Company can reduce its risks by purchasing them when its value increase and currency decreases. On the other hand speculation also happens some times which is not considered good and it can increase risk factors. e. Investment banks: Institution which helps business financing by selling, distributing or underlying new securities to help that company Commercial Banks: They help in traditional way of stock broking services, insurance or any other services required for the system for supply of money Financial Services of Corporations: When many financial services are provided under one roof by large financial conglomerate. Pension Funds: Retirement plans funded by corporations or government bodies which can be used after the age of retirement, usually part of these finds trade in stocks, bonds. They can also be provided by insurance agencies which cover the insurance of the person also Mutual Finds: The corporations which takes large pool of money from many small investors and further invests in capital market and purchases securities, bonds etc. This diversifies the portfolio for an investor and hence reduces the risks and increases the returns. Exchange traded funds: Commonly known as ETF\'s are traded on stock exchanges they are usually governed by mutual find companies and f.

1. a. Three primary ways in which capital is transferred between savers and borrowers:
b. The place where assets can be bought or sold is considered as market. Also there are many
types of financial (financial product markets) other than physical asset markets.
Physical market has tangible assets like machine, real estate, products etc. while financial
markets claim to have a part in that assets which can be traded at the exchanges (i.e. financial
markets).
Spot markets are the place where assets are bought and sold in the market on spot with delivery
while future markets are the place where in participants agree to buy at a future date.
Money market is the market where securities are traded with less than one year maturity (i.e.
short term) while long term securities trades in capital market.
Primary markets is the market wherein companies/corporations raise money by issuing new
securities while in Secondary markets, these securities are being traded by investors which are
already issued
A Private market is a place where in transaction takes place between two investors or two parties
directly, while Public Market is a place where there are standard contracts trading at market
place available to multiple investors.
c.Healthy economy is depended on fund transfers from its citizens. Without the transfer of
money economy can not function effectively. Economic development is related with the
development and efficiency of financial markets. Economic transfers are necessary to run the
financial markets so that companies can grow and hence economy.
d. The financial asset whose value can be defined by any other underlying asset is Derivatives.
Majorly they are used to reduce risks. Company can reduce its risks by purchasing them when its
value increase and currency decreases. On the other hand speculation also happens some times
which is not considered good and it can increase risk factors.
e.
Investment banks: Institution which helps business financing by selling, distributing or
underlying new securities to help that company
Commercial Banks: They help in traditional way of stock broking services, insurance or any
other services required for the system for supply of money
Financial Services of Corporations: When many financial services are provided under one roof
by large financial conglomerate.
Pension Funds: Retirement plans funded by corporations or government bodies which can be
used after the age of retirement, usually part of these finds trade in stocks, bonds. They can also
be provided by insurance agencies which cover the insurance of the person also
Mutual Finds: The corporations which takes large pool of money from many small investors and

2. further invests in capital market and purchases securities, bonds etc. This diversifies the portfolio
for an investor and hence reduces the risks and increases the returns.
Exchange traded funds: Commonly known as ETF's are traded on stock exchanges they are
usually governed by mutual find companies and follows an index of investment
Hedge Funds: These are used when High Net worth individual tries to reduce the risks by
hedging other opportunities available in the market
Private Equity Companies: They tend to buy and manage the entire firm where in they take
investments from big players, the company is being operated and government by PE companies
latter on. Hence they do not buy stocks in the market rather than that they buy the companies
directly.
f. Two leading stock exchanges:
Two basic type of stock exchanges:
Physical location exchanges trades in stocks, bonds, securities, commodities, futures and options
etc. Here buyers and seller place orders on a common platform i.e. exchange. On the other hand
electronic dealer market works on phone or computer where the securities are not located at the
exchanges.
g. If Apple decided to issue additional common stock and Varga purchases 100 shares from
Smyth Barry then:
h. Initial Public Offering commonly known as IPO is a term used when a company lists its stocks
first time. Herein company raises money from the money market and the stock is being traded in
the market
i. When investors can buy and trade with confident are they do get good prices the market is said
to be efficient, on the other hand when investors are afraid and the market is in efficient as this
may lead to poor allocation of capital. Some stock prices can be more efficient to others as it
depends on the size of company, growth of industry, interest of the buyers, economic
development, government regulations and its impact over the industry
j.
1. If the market is already efficient then probably this is late to buy the stock as the prices might
have already slashed up and returns can be very slow. On the other hand if the market is going to
get efficient, then the stock can be certainly bought.
2. It should be noted that all IPOs are not always well received and accepted in the market. Also,
in case if some one is able to identify it there are less chances to get it subscribed. Hence if
things are not clear, it is suggested that let the stock come in secondary market and let it trade
first. this gives a clear picture of the scenario
k. Behavioral finance considers psychological insights to better understand how irrational

3. behavior can be sustained over time. It is being observed that investors tend to react differently
when markets goes up and down. The results are bias some times in the real world. It is basically
the psychology that acts in the market and hypothesis are being derived on individual basis about
the predications of stock prices.
Solution
a. Three primary ways in which capital is transferred between savers and borrowers:
b. The place where assets can be bought or sold is considered as market. Also there are many
types of financial (financial product markets) other than physical asset markets.
Physical market has tangible assets like machine, real estate, products etc. while financial
markets claim to have a part in that assets which can be traded at the exchanges (i.e. financial
markets).
Spot markets are the place where assets are bought and sold in the market on spot with delivery
while future markets are the place where in participants agree to buy at a future date.
Money market is the market where securities are traded with less than one year maturity (i.e.
short term) while long term securities trades in capital market.
Primary markets is the market wherein companies/corporations raise money by issuing new
securities while in Secondary markets, these securities are being traded by investors which are
already issued
A Private market is a place where in transaction takes place between two investors or two parties
directly, while Public Market is a place where there are standard contracts trading at market
place available to multiple investors.
c.Healthy economy is depended on fund transfers from its citizens. Without the transfer of
money economy can not function effectively. Economic development is related with the
development and efficiency of financial markets. Economic transfers are necessary to run the
financial markets so that companies can grow and hence economy.
d. The financial asset whose value can be defined by any other underlying asset is Derivatives.
Majorly they are used to reduce risks. Company can reduce its risks by purchasing them when its
value increase and currency decreases. On the other hand speculation also happens some times
which is not considered good and it can increase risk factors.
e.
Investment banks: Institution which helps business financing by selling, distributing or
underlying new securities to help that company
Commercial Banks: They help in traditional way of stock broking services, insurance or any
other services required for the system for supply of money

4. Financial Services of Corporations: When many financial services are provided under one roof
by large financial conglomerate.
Pension Funds: Retirement plans funded by corporations or government bodies which can be
used after the age of retirement, usually part of these finds trade in stocks, bonds. They can also
be provided by insurance agencies which cover the insurance of the person also
Mutual Finds: The corporations which takes large pool of money from many small investors and
further invests in capital market and purchases securities, bonds etc. This diversifies the portfolio
for an investor and hence reduces the risks and increases the returns.
Exchange traded funds: Commonly known as ETF's are traded on stock exchanges they are
usually governed by mutual find companies and follows an index of investment
Hedge Funds: These are used when High Net worth individual tries to reduce the risks by
hedging other opportunities available in the market
Private Equity Companies: They tend to buy and manage the entire firm where in they take
investments from big players, the company is being operated and government by PE companies
latter on. Hence they do not buy stocks in the market rather than that they buy the companies
directly.
f. Two leading stock exchanges:
Two basic type of stock exchanges:
Physical location exchanges trades in stocks, bonds, securities, commodities, futures and options
etc. Here buyers and seller place orders on a common platform i.e. exchange. On the other hand
electronic dealer market works on phone or computer where the securities are not located at the
exchanges.
g. If Apple decided to issue additional common stock and Varga purchases 100 shares from
Smyth Barry then:
h. Initial Public Offering commonly known as IPO is a term used when a company lists its stocks
first time. Herein company raises money from the money market and the stock is being traded in
the market
i. When investors can buy and trade with confident are they do get good prices the market is said
to be efficient, on the other hand when investors are afraid and the market is in efficient as this
may lead to poor allocation of capital. Some stock prices can be more efficient to others as it
depends on the size of company, growth of industry, interest of the buyers, economic
development, government regulations and its impact over the industry
j.
1. If the market is already efficient then probably this is late to buy the stock as the prices might
have already slashed up and returns can be very slow. On the other hand if the market is going to

5. get efficient, then the stock can be certainly bought.
2. It should be noted that all IPOs are not always well received and accepted in the market. Also,
in case if some one is able to identify it there are less chances to get it subscribed. Hence if
things are not clear, it is suggested that let the stock come in secondary market and let it trade
first. this gives a clear picture of the scenario
k. Behavioral finance considers psychological insights to better understand how irrational
behavior can be sustained over time. It is being observed that investors tend to react differently
when markets goes up and down. The results are bias some times in the real world. It is basically
the psychology that acts in the market and hypothesis are being derived on individual basis about
the predications of stock prices.