1.) Explain the workings of a stock exchange and distinguish between different types of financial instruments and the risks associated with each.
2.) Distinguish among various sources of short term and long term financing, the risk associated with each and explain the steps in risk management process.
Answer 1: Stock exchange is simply a market that is planned for selling and purchasing of corporation securities. It intends that stock exchange helps to sell and buys shares, securities and other stocks of companies for the security of their future (Munnell & Sass, 2006). Stock exchange provides a floor to companies that are called posts along with brokers that help in trading of stocks with the help of post section because it contains buying and selling stocks. Stock exchange also facilitates services of financial professionals in that condition, when the rate of stock is not as per the requirements of purchaser (Pratt, 2010). It helps to create a contact between buyers and sellers to purchase stock at the particular price level determined by the supply and demand forces in the market. After this transaction, it is told to the investor and it is added on the display devices of stock market.
Risks Associated with Specific Financial Instruments: Money-market and bond instruments: The money-market instrument is a form of debt securities that have a time of maturity less than one year. But the bond instruments are a form of securities that represent the dedication of borrowers to lender of funds. Money-market ...
The financial resources of stock exchanges are examined. The expert distinguishes among various sources of short term and long term financing.