The Investment Environment

1
The Investment Environment

• Topic 2
• Investment Markets and Transactions

2
A. Securities Markets

• 1. Types of Security Markets
• a. Primary Markets
• b. Secondary Markets
• 2. Organized Security Exchanges
• a. The BIG BOARD or NYSE
• b. The AMEX
• c. Regional Exchanges
• d. Option Exchanges
• e. Futures Exchanges

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Securities Markets (continued)

• 3. Over-the-Counter Market
• 4. NASDAQ (National Association of Securities
  Dealers Automated Quotation)
• 5. Regulation of Securities Market
• 6. General Market Conditions
• a. The Bull Market
• b. The Bear Market
• Wall Street is the only place that people ride to
  in a Rolls-Royce to get advice from those who
  take the subway. -Warren Buffett

4
B. Making Security Transactions

• 1. Stockbrokers
• 2. Selecting a Stockbroker
• 3. Basic Types of Transactions
• a. Long Purchase
• Buy low/sell High
  
• b. Short Sale
• Sell high/Buy Low
• c. Margin Purchase
• Use OPM

5
Review Questions Section 2

• What is the difference between primary and
  secondary markets?
• Define the two general market conditions
• Define
• long purchase
• short sale
• margin purchase

6
Margin Trading OPM

• Margin at 50
• Assume you have 2,000 and a stock costs
  20/share. Without margin you can only purchase
  100 shares (2,000/20). With margin you can
  borrow an additional 2,000 and buy 200 shares
  (4,000/20).
• If the price goes to 40
• Without margin your gain is 2,000 (40-20 times
  100 shares).
• With margin your gain is 4,000 minus the
  interest costs on your margin money.