Q1: Why secondary markets are so important to raise capital? (1 mark) The answer *The secondary market retail market where previously issued securities are resold. *The secondary market is very important due to they allow investors to convert securities easily to cash. *The secondary market is authorize the investors to sell or buy previously issued that owned securities for cash. *The secondary market traders are, almost by definition, economically efficient. Q2: Briefly discuss the Time Value of Money concept?

QUESTION

I have assignment 2 questions and already I have the answers but I need from you side to rewrite it on another way

Q1: Why secondary markets are so important to raise capital? (1 mark)

The answer

*The secondary market retail market where previously issued securities are resold.

*The secondary market is very important due to they allow investors to convert securities easily to cash.

*The secondary market is authorize the investors to sell or buy previously issued that owned securities for cash.

*The secondary market traders are, almost by definition, economically efficient.

Q2: Briefly discuss the Time Value of Money concept?

Answer:

v Price/value today of cash flows (whether the cash flow is a payment to be made or income to be received) that occur in the future is determined by the time value of money (TVM)

v TVM is based on belief that people prefer to consume goods today rather than wait to consume the same goods tomorrow

üApple we can have today is more valuable to us than an apple we can have in one year.

üMoney has a time value because buying an apple today is more important than buying an apple in one year

v Dollar someone has today can be spent for consumption or loaned to earn interest

v Dollar loaned earns interest that increases wealth and the ability to consume

v The rate of interest determines the trade-off between consumption today and saving (investing)

v Timelines are an effective way to visualize cash flows

v Present cash outflows as negative values

v Present cash inflows as positive values

v Cash-flows are evaluated based on future value or present value

v Future value measures what cash-flows are worth after a certain amount of time has passed

ühave in one year.

üMoney has a time value because buying an apple today is more important than buying an apple in one year

v Dollar someone has today can be spent for consumption or loaned to earn interest

v Dollar loaned earns interest that increases wealth and the ability to consume

v The rate of interest determines the trade-off between consumption today and saving (investing)

v Timelines are an effective way to visualize cash flows

v Present cash outflows as negative values

v Present cash inflows as positive values

v Cash-flows are evaluated based on future value or present value

v Future value measures what cash-flows are worth after a certain amount of time has passed

v Present value measures what future cash-flows are worth before a certain amount of time has passed

v Compounding is the process of increasing cash-flows to a future value

v Discounting is the process of reducing future cash-flows to a present value

ANSWER

Q1: What is the significance of secondary markets in raising capital? (1 mark

– Secondary markets refer to the retail market where previously issued securities are bought and sold.

– The importance of secondary markets lies in their ability to provide investors with a convenient means of converting securities into cash.

– By enabling investors to sell or purchase previously issued securities for cash, secondary markets facilitate liquidity.

– Secondary market traders are known for their economic efficiency, making the market an essential component of capital raising endeavors.

Q2: Exploring the Concept of Time Value of Money

– The Time Value of Money (TVM) concept revolves around the idea that the present value of future cash flows, whether payments or income, is influenced by various factors.

– TVM is based on the understanding that individuals generally prefer to consume goods and services in the present rather than waiting until the future.

– For instance, an apple available today holds more value than the same apple obtainable a year later.

– Money possesses a time value because acquiring an apple today carries more significance than acquiring it in a year’s time.

– When someone has a dollar today, they can either spend it on immediate consumption or invest it to earn interest.

– The act of loaning a dollar allows for wealth accumulation through the interest earned, thereby enhancing one’s capacity for consumption.

– The interest rate plays a crucial role in determining the trade-off between present consumption and saving (investment).

– Timelines effectively visualize the flow of cash over time, aiding in financial analysis.

– Cash outflows are represented as negative values on a timeline, while cash inflows are depicted as positive values.

– Cash flows are evaluated based on their future value or present value.

– Future value measures the worth of cash flows after a specific time period.

– Present value, on the other hand, assesses the current worth of future cash flows before a specified time has elapsed.

– Compounding refers to the process of increasing cash flows to their future value.

– Discounting, conversely, involves reducing future cash flows to their present value.