金融业导论 OUTCOME.docx

1. Please give the operation of the LSE as a primary market for shares. Primary market is new issues market new issues market deals with/issues new securities in return for capital government also uses market for selling securities market brings lenders and borrowers together encouraging those with funds to invest to buy company shares investors hope to benefit from long term share price growth and from regularreceipt of company profits (dividends) companies can use funds for medium and long term investment such ascompany expansion, acquisitions of other businesses or debt consolidation merchant banks play important role in assisting companies to come to the market2. Then what is an IPO? What is the Procedure for Issuing an IPO? What are the advantages and disadvantages of issuing shares? a) Initial Public Offerings is the first sale of a corporations common shares to public investors. The main purpose of an IPO is to raise capital for the corporation.b) prospectusFirst, IPO company must submit a prospectus to the regulatory commission, only when the prospectus passed, the company was allowed to continue to Public offerings.Road ShowAnd then the company need to publicize themselves to the public through Road Show.Venture Capitalist invest in IPOAfter the road show, some companies or financial institution investors will be interested in the IPO Company. They would invest in the company as a Venture Capitalist.UnderwriterAnd one of the financial institutions may be employed for the IPO company Underwriter.All stocks are sold to the marketThe underwriter would be responsible for the work during the list of all the new stocks and the sale to the markets.If the stock is not all sold out, underwriters need to buy all of this unsold shares or to be irresponsible.c) advantages of issuing shares1.Raise their name recognition on the domestic and international markets and improving the company image. Company can earns prestige from being listed 2.Broaden the channels for investment from society and for enterprise financing. Strengthen the basis for its further development3.Listed companies can use stock option plans to motivate the executives and the staff. Attract and retain talent4.Issue of shares belong to the direct financing, no interest, no need to return the principal“. Funds raised do not need to be repaid, unlike borrowing5.Facilitate the assessment of enterprise value.Disadvantages of issuing shares1.shareholders exercise voting rights so company loses some control.2.Listing is expensive. The company will be responsible for the high cost merchant bank fees, underwriting costs, accounting and solicitor fees etc3.The directors of the company will take on a greater responsibility to shareholders to ensure a fair and higher dividends, profits etc. that meet shareholder expectations.4.The company will be at greater risk from unwelcome takeover bids from other companies3. Now please name four types of financial derivative instruments.There are many specific financial derivative instruments to accomplish this, including, forward contracts, swaps, options and perhaps most popularly, futures contracts. 4. Please describe what a traded option is. In finance, an option is a contract between a buyer and a seller that gives the buyer of the option the right, but not the obligation, to buy or to sell a specified asset on or before the options expiration time, at an agreed price, the strike price. right not obligation to buy or sell a share at pre-set price up to a specified date right to buy is known as put option right to sell is known as call option seller (writer) risks selling or buying shares at a lower price than the prevailing market value5. Draw the chart showing the money markets in the UK.Please explain how the parallel market for negotiable CDs operates. issued by banks and building societies as acknowledgement of funds beingdeposits negotiability allows them to be transferred to third parties for value no owners name appears on the certificate issued on terms of three months to five years amounts of 50k to 500k usually carry a fixed rate of interest for the term but may be floating rate method of inter-bank financing secondary market for CDs where bought and sold at below face value very liquid, realisable quickly mainly issued in dollars, but sterling is used6. What do you think that the main functions of the Bank of England as the UKs central bank are? (your answer should be not less than 300 words and not more than 500 words.)In 1946, the Bank of England was nationalized. It is the central bank of the United Kingdom, attaching to Ministry of Finance. And it has the three classic features being a central bank:1 Exclusive-issuing bank 2 Banker to the government3 Banker to other banksExclusive-issuing bank The Bank of England only has the note-issuing right in England and wales, Generally, in Scotland and Northern Ireland it is issued by other normal commercial Banks. Although it is issued by themselves, it should take the currency issued by the Bank of England as the reserve.Banker to the governmentAs the banker to the government, the Bank of England acts for the Treasury, dealing with taxation and Government spending. And also issue government securities to raise money, executing to intervene the exchange rate in order to steady the value of pond.The Bank of England also stand for government to take part in all the international financial organizations, is responsible to convene the monetary policy committee to determine the relevant policies such as the interest and to be responsible for the national monetary policy.rediscount rate, deposit reserve ratio and open market operations is the three major means to carry out the monetary policy.Banker to other banksThe central bank only rediscount to the Discount House and is the lender of last resort. The Bank of England is also keeping the deposit reserve of the commercial banks, and to be the clearing bank of the note.The Bank of England supervises the commercial banks and other Financial institutions of UK. And in the period of inflation, The Bank of England can ask the banking system to