You are a new manager for a Fortune 500 company, and you've been invited to speak as a guest lecturer for a first-year finance course at the local university.
Explain to the class what you consider a top mechanic of a primary market and a top mechanic of a secondary market. How would you explain the way the performance of your company is influenced by the activity of the markets you described?
Sample Answer
Top Mechanics of the Primary Market
The primary market is where new securities are created and sold to investors for the first time. The top mechanics of the primary market are the institutions and individuals that play a key role in the process of bringing new securities to market. These include:
- Investment banks: Investment banks act as intermediaries between companies that are issuing new securities and investors who are interested in buying them. They underwrite the new securities, which means they commit to buying them from the issuer at a predetermined price and then selling them to investors.