Question

a. Distinguish between the following:
i. Primary market and secondary market
ii. Money market and capital market
iii. Fixed income security and convertible security
iv. Systematic risk and Unsystematic risk
b. You are an investment advisor and you are asked to guide a new investor to trade shares on the Ghana Stock Exchange (GSE). Explain any six (6) of the listing requirement of GSE that are to be met before the company can start trading on the market.

Answer 1

a)Primary market and secondary market

Primary market is where securities are created,whereas seconadry market is where those securities are traded by investors.

An IPO(initial public offering) is an example of a primary market.

In primary market,transactions(Buying and selling) take place between Company and investors and in secondary market transactions(Buying and selling) take place between Investors only.

b)Money market and capital market

Money market are used for short term lending or borrowing usually the assets are held for one year or less,Whereas capital markets are used for long term securities.

Risk factor under money market is low,whereas it is comparatively high under capital market

c)Fixed income security and convertible security

Fixed income security is a debt instrument issued by a government,corporations or other entity.Fixed income securities provide investors a return in the form of fixed periodic payments and eventual return of pricipal at maturity.

Conevrtible seccurity comes with option of conversion.For example,A convertible bond is a fixed income corporate debt security that yields interest payments but can be converted into a prdetermined no. of common stock or equity shares.

d)Systematic risk and Unsystematic risk

Systematic risk is the probability of a loss associated with the entire market or the segment whereas Unsystematic risk is associated with a specific industry,segment or security.

Systematic risk is uncontrollable in nature since large scale and multiple factors are involved whereas unsystematic risk is controllable as it is restricted to a particular section.