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Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
19-1
Using Securities
Markets for Financing
and Investing Oppor-
tunities
chapter
=
what’s new in this edition 19.3
brief chapter outline and learning goals 19.3
lecture outline and lecture notes 19.6
PowerPoint slide notes 19.58
lecture links 19.80
lecture link 19-1: THE IPO FROM HELL 19.81
lecture link 19-2: ASIAN IPOS OVERTAKE THE UNITED STATES 19.81
lecture link 19-3: NYSE’S GERMAN MERGER 19.81
lecture link 19-4: THE TOKYO EXCHANGE TYPING ERROR 19.82
lecture link 19-5: THE DOMINICAN NUNS’ STOCK PORTFOLIO 19.82
lecture link 19-6: THE DANGERS OF ETFS 19.83
lecture link 19-7: THE DAY THEY CALL “BLACK TUESDAY” 19.84
19
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
19-2
lecture link 19-8: INVESTING IN COMMODITIES 19.84
critical thinking exercises 19.86
critical thinking exercise 19-1: FINANCING GROWTH 19.86
critical thinking exercise 19-2: PLAYING THE STOCK MARKET 19.87
critical thinking exercise 19-3: DOW JONES COMPONENTS 19.89
bonus cases 19.91
bonus case 19-1: IS IT TIME FOR AN NYSE CODE OF ETHICS? 19.91
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
19-3
deletions from the 9th edition:
• Getting to Know Warren Buffett, CEO of Berkshire Hathaway
• Name That Company: Standard & Poor’s/Moody’s
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
19-4
learning goal 3
Compare the advantages and disadvantages of equity financing by issuing stock, and detail
the differences between common and preferred stock.
C. Different Classes of Bonds
D. Special Bond Features
learning goal 5
Explain how to invest in securities markets and set investment objectives such as long-term
growth, income, cash, and protection from inflation.
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
19-5
VII. INVESTING IN BONDS
A. Investing in High-Risk (Junk) Bonds
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
Getting to Know MARIA BARTIROMO of CNBC
Emmy Award–winning Maria Bartiromo has been a familiar face on CNBC since the 1990s.
She was the first journalist to broadcast directly from the NYSE floor. Quick to show she’s
i. Corporations make money on the sale of
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
PPT 19-1
Chapter Title
PPT 19-2
Learning Goals
(See complete PowerPoint slide notes on page 19.58.)
PPT 19-3
Learning Goals
(See complete PowerPoint slide notes on page 19.58.)
PPT 19-4
Maria Bartiromo
(See complete PowerPoint slide notes on page 19.59.)
PPT 19-5
Name That Company
(See complete PowerPoint slide notes on page 19.59.)
PPT 19-6
The Basics of Securities Markets
(See complete PowerPoint slide notes on page 19.59.)
PPT 19-7
Types of Securities Markets
(See complete PowerPoint slide notes on page 19.60.)
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
their securities ONLY ONCE, when they
are first sold on the primary market.
EARNINGS or by BORROWING from a lend-
a discount and then selling the issue to investors.
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
lecture link 19-1
THE IPO FROM HELL
Google’s 2004 IPO didn’t go exactly as planned. (See the
complete lecture link on page 19.80 in this manual.)
lecture link 19-2
ASIAN IPOS OVERTAKE THE
UNITED STATES
In 2010, Asia’s number of IPOs eclipsed the competition
from the U.S. and Europe. (See the complete lecture link on
page 19.81 in this manual.)
critical thinking
exercise 19-1
FINANCING GROWTH
This exercise presents a situation in which a company is
considering expanding and must decide how to finance the $1
million expansion. (See complete exercise on page 19.86 of
this manual.)
PPT 19-8
Investment Bankers and
Institutional Investors
(See complete PowerPoint slide notes on page 19.60.)
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
3. INSTITUTIONAL INVESTORS are large inves-
tors—such as pension funds, mutual funds, and
funds or the funds of others.
4. Institutional investors are a powerful force in se-
Identify the stock exchanges where securities are traded.
b. The NASDAQ is a nationwide electronic sys-
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
lecture link 19-3
NYSE’S GERMAN MERGER
In an effort to compete with its rivals, the NYSE merged
with the Frankfurt Stock Exchange with hopes they will entice
more investors. (See the complete lecture link on page 19.81
in this manual.)
PPT 19-9
Stock Exchanges
(See complete PowerPoint slide notes on page 19.60.)
PPT 19-10
Top Stock Exchanges
(See complete PowerPoint slide notes on page 19.61.)
SPOTLIGHT ON
small
business
(Text page 525)
PPT 19-11
A Place for Small
Companies to
Call Home
(See complete PowerPoint slide notes on page 19.61.)
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
tem that links dealers across the nation so
that they can buy and sell securities (origi-
TIES AND EXCHANGE COMMISSION
1. The SECURITIES ACT OF 1933 protects inves-
SION (SEC) is the federal agency that has re-
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
lecture link 19-4
THE TOKYO EXCHANGE TYPING
ERROR
One erroneous trade cost Mizuho Securities at least 27 bil-
lion yen ($225 million). (See the complete lecture link on page
19.82 of this manual.)
PPT 19-12
The Securities and Exchange
Commission
(See complete PowerPoint slide notes on page 19.62.)
such as filing a PROSPECTUS.
3. A PROSPECTUS is a condensed version of
economic and financial information that a com-
pany must file with the SEC before issuing
4. INSIDER TRADING involves the use of
knowledge or information that individuals gain
through their position that allows them to benefit
4. Other major exchanges are located in Shang-
hai, Paris, Sydney, Hong Kong, Sao Paolo, and
Toronto.
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
19-15
TEXT FIGURE 19.1
Is It Insider Trading or Not?
(Text page 526)
This figure asks students to test their skill in identifying in-
sider trading.
bonus case 19-1
IS IT TIME FOR AN NYSE CODE
OF ETHICS?
Doctors have a code of ethics. Advertisers have a code of
ethics. Is it time for the NYSE to enact a code of ethics? (See
the complete case, discussion questions, and suggested an-
swers beginning on page 19.91 of this manual.)
progress
assessment
(Text page 527)
PPT 19-13
Progress Assessment
(See complete PowerPoint slide notes on page 19.62.)
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
learning goal 3
the type of stock being issued.
3. PAR VALUE is a dollar amount assigned to
5. Paying INTEREST ON BONDS is a legal obli-
gation; paying DIVIDENDS ON STOCK is not.
SUING STOCK
1. ADVANTAGES OF ISSUING STOCK IN-
ers’ investment never has to be repaid.
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
PPT 19-14
Learning the Language of Stocks
(See complete PowerPoint slide notes on page 19.62.)
PPT 19-15
Advantages of Issuing Stock
(See complete PowerPoint slide notes on page 19.63.)
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
b. There is no legal obligation to pay divi-
2. DISADVANTAGES OF ISSUING STOCK IN-
rectors.
2. Common stock includes the rights:
a. To ELECT a company’s board of directors
firm’s board of directors.
PPT 19-16
Disadvantages of Issuing Stock
(See complete PowerPoint slide notes on page 19.63.)
PPT 19-17
Two Classes of Stock
(See complete PowerPoint slide notes on page 19.63.)
Chapter 19 - Using Securities Markets for Financing and Investing Opportunities
holders have the first right to purchase any new
1. PREFERRED STOCK is stock that gives its
owners preference in the payment of dividends
and an earlier claim on assets than common
2. PREFERRED STOCK DIVIDENDS DIFFER
FROM COMMON STOCK DIVIDENDS in sev-
