FINANCIAL MARKETS Below is the assignment, i have attached the previous milestones. This final paper is a continuation from the previous milestones. thank you 7-2 Final Project Submission Good day,

FINANCIAL MARKETS Below is the assignment, i have attached the previous milestones. This final paper is a continuation from the previous milestones. thank you 7-2 Final Project Submission Good day,
Final Project Milestone Four: Draft of Risks and Returns IV. Risk and Returns. Investment instrument The New York Security Exchange (NYSEarca) and the London Security Exchange is U.S. markets and one non-U.S. market (LSE). The PIMCO active bond exchange-traded fund (BOND) is a diversified ETF that invests in main US government bonds and investment-grade corporate debt. As of February 4th, 2022, the US PIMCO active bond exchange-traded fund’s net asset value (NAV) is 108.74. The yield on the bond is 2.53 percent. The NYSE SPDR gold shares (GLD) are a class of stock in the SPDR family of exchange-traded funds. The GLD’s NAV is about 169.20, and the YTD daily total return is negative 1.52 percent. The fidelity 500 index fund is one of the mutual funds listed on the Nasdaq market (FXAIX). This is one of the cheapest funds among the top ten best-performing fidelity funds for retirement. Fidelity 500 index fund has the yield if 1.26 percent. According to the graph, the stock, bond, and GLD investment security have all shown good growth in the last year, with values ranging from $100 to $170. According to the graph, the US market appears to be favorable for security investments. Different securities experienced positive growth, showing that the New York Stock Exchange securities saw good growth. The market appears to be stable, indicating that it is a potential investment market. Like the fidelity 500 index fund (FXAIX), a jointly invested group of portfolios, some assets did better due to lower investment risk. When compared to other securities, the bond yielded a higher return of 2.3 percent on the previous day. GLD also produced a strong return, despite the available stock prices being recorded this year. Mutual funds offer lower risk since they are diversify investment instruments, minimizing the total risk that can be stated in single investments such as stocks and bonds. The US market is more stable, signifying less risk, whereas the non-US market is very risky due to other factors such as inflation and the economy’s political condition. The firm will evaluate the US market due to market stability and foreign exchange difficulties that may damage the value of the investment if the investor considers markets other than the US. Interest and Inflation: Due to inflation’s negative relationship with interest rates, it tends to harm fixed-income investments. As inflation grows, investors’ expected returns increase to keep pace with inflation. When interest rates on debt instruments are set for the instrument’s duration, the price falls as investors sell lower-yielding items in favor of higher-yielding ones (Borağan Aruoba, 2020). As a result, fixed-rate debt investments suffer significant losses in a rising inflation environment. In some situations, inflation-protected securities can modify their yields in response to inflation. Inflation increases the cost of goods and services, reducing the dollar’s purchasing power. As a result of the increase in inflation, customers may purchase fewer items, and profits decline, resulting in the economy stalling until stability returns. Additionally, inflation increases stock prices without a matching gain in value. Due to the reduction in the purchasing dollar’s value, investors will be able to purchase fewer shares for a higher price. As a result of inflation overstatement, investors may assume the company’s financial condition is positive. Investors should invest in inflation-indexed products such as Treasury bonds and other products that provide a hedge against rising rates during periods of inflation (Borağan Aruoba, 2020). Market interest rates substantially impact bond portfolios since higher interest rates result in lower bond values, while lower interest rates result in greater bond values. As a result, more fixed-income securities, particularly long-maturity bonds, as central banks adjust interest rates to combat inflation, are impacted. Increased interest rates have a greater impact on longer-maturity bonds than shorter ones. Interest rates affect inflation-protected security, which means that every change in interest rates pushes the price of the bond higher or lower (Alam & Uddin, 2009). On the other hand, a rise in inflation would result in a rise in bond yields as investors seek inflation risk protection and vice versa. When bond prices fall, investors lose interest, resulting in a decrease in the value of the investment. The non-US market refers to financial markets located outside the United States. Interest and inflation play a significant effect in determining the value of stocks, bonds, and inflation-linked instruments. Increased inflation rates, for example, in the European securities market, will result in increased purchasing power, increased stock prices, and increased interest rates to rein in inflation, all of which will affect the value of stocks and bonds. Investors from the United States will see their investment values fluctuate significantly when the dollar loses value against the pound or euro. Businesses and investors seeking to invest their free cash flow in securities will choose short-term investments to ensure that inflation does not harm their fixed-income securities. During periods of high inflation, investors will choose to invest in inflation-protected securities or a major portion of their income in the stock market as a hedge against inflation. Having cash is worse than holding an asset during periods of high inflation (Alam & Uddin, 2009). The projected return on the business will influence the investor’s long-term investing strategy; if the expected return is poor, the investor will avoid investing in securities. Taxation Governments can makes monetary and fiscal policy changes that greatly impact the taxes charged on capital gain on securities, interest charged on loan and inflation experience in the economy. Investing in the United States market is a better alternative for IPO listing than investing in other non-US markets. Companies listed on the New York Stock Exchange can access a vast pool of cash and grow their prospective investor base depending on securities. Because the Federal Reserve controls the interest rate levied on loans as well as inflation, businesses can obtain loans at lower rates, allowing them to take on less financial risk. For example, a company listed on the New York stock exchange will be transparent, follow SEC standards, and have its shares and bonds subject to inflation and interest rates set by the Federal Reserve bank. Non-US markets, despite offering securities with lower market capitalization, have a tax regulation that affects tax dividends payables, faces inflation, and interest rates controlled by Bank of England. Tax policies on capital gains will also influence firm decision to invest in the U.S market compared to the Non-U.S market. References Borağan Aruoba, S. (2020). Term structures of inflation expectations and real interest rates. Journal of Business & Economic Statistics, 38(3), 542-553. Alam, M. D., & Uddin, G. (2009). Relationship between interest rate and stock price: empirical evidence from developed and developing countries. International Journal of Business and Management (ISSN 1833-3850), 4(3), 43-51. Yahoo finance.Com. (n.d).PIMCO Active Bond Exchange-Traded Fund (BOND). Retrieved from https://finance.yahoo.com/quote/BOND?p=BOND Yahoo finance.Com. (n.d).Fidelity 500 Index Fund (FXAIX). Retrieved from https://finance.yahoo.com/quote/FXAIX/ Yahoo finance.Com. (n.d). SPDR Gold Shares (GLD). Retrieved from https://finance.yahoo.com/quote/GLD?p=GLD
FINANCIAL MARKETS Below is the assignment, i have attached the previous milestones. This final paper is a continuation from the previous milestones. thank you 7-2 Final Project Submission Good day,
Running Head: ORGANIZED EXCHANGES 0 Organized Exchanges Definition Organized exchanges give companies a platform to sell shares to investors to raise capital to finance their businesses. The shares are sold according to formal rules formulated by the exchanges. Investors also use these exchanges to trade shares between themselves. There are several organized exchanges where companies can list and sell their shares in the world. Companies in the United States have several options such as the New York Stock Exchange (NYSE), the American Securities Exchange (AMEX) and the National Association of Securities Dealers (NASDAQ). Main Organized Exchanges in the US All organized exchanges have a common goal, to raise capital. However, they all have slight differences in their operations. The NYSE and AMEX have physical trading floors where investors conduct transactions individually or through brokers. However, the advancement of electronic media has made NYSE switch to online trading. The NYSE has strict listing and reporting requirements and thus only lists established companies such as Ford Motor Co., Alibaba Group Holding Limited, and Boeing Co (Macey, 2002). The AMEX functions like the NYSE but without stringent listing requirements. Thus, AMEX attracts smaller companies that cannot meet the NYSE’s requirements. Unlike the NYSE, all trades on NASDAQ occur online. Therefore, trading is highly efficient and attracts traders from all over the world. NASDAQ’s early listing requirements attracted technology companies that could meet NYSE requirements, and their success had made it a favorite of technology firms in the country. Examples of companies listed on NASDAQ are Apple, Facebook, Amazon, and Google. Bumble Inc IPO Bumble Inc is a software development multinational headquartered in Austin, Texas. The company was founded in 2014 by the current CEO Whitney Wolfe Herd. Bumble Inc. owns and operates online dating and social networking applications that enable users to meet new individuals for relationships, dating, and friendship. The company’s consumer market is geographically segmented in North America, Europe, and the rest of the world. The products are divided into free and subscription models. However, the company generates a bulk of its revenue from in-app purchases. The company’s products have a unique feature that it a competitive edge; women have to initiate conversations. Bumble Inc. went public in the NASDAQ stock exchange on 10th February 2021. Bumble Inc.’s decision to trade on NASDAQ was the best given the platform’s reputation among technology start-ups. The company raised two billion dollars in its initial public offering, IPO. The IPO was strategically launched days before Valentine’s Day. The company initially offered to sell thirty-four million shares with prices ranging between twenty-eight to thirty dollars. However, the company sold fifty million shares at forty-three million dollars due to increased demand. Therefore, Bumble Inc raised twice the capital it planned on its first day on the NASDAQ trading floor. The share price rose to seventy dollars the day after the IPO, which rewarded early investors who had bought the IPO. References Macey, J. R., & O’Hara, M. (2002). The economics of stock exchange listing fees and listing requirements. Journal of Financial Intermediation, 11(3), 297-319.
FINANCIAL MARKETS Below is the assignment, i have attached the previous milestones. This final paper is a continuation from the previous milestones. thank you 7-2 Final Project Submission Good day,
ORGANIZED EXCHANGES 0 Organized Exchanges Organized stock exchanges provide companies with an avenue to assess the deep pockets of investors from around the world. However, these exchanges are not the same, and they differ in size, trading volume, and regulations. Therefore, companies evaluate different exchanges before choosing the one that best suits their needs. However, the company can only be listed if they meet the exchange’s listing requirements. The reputation of major stock exchanges depends on the companies allowed to trade on their platforms. Reputation attracts investors to the exchange. Thus, the exchanges only consider listing companies that meet specific requirements such as quality management, solid financial history, etc. The exchanges also monitor the companies trading on their platforms to ensure transparency and accountability and protect investors’ money. The Securities and Exchange Commission (SEC) is a federal agency that monitors and regulates the trading of securities in the United States (Karmel, 2009). NASDAQ listing requirements Bumble Inc. chose to be listed on NASDAQ for reasons best known to its executives. NASDAQ requires all companies seeking to be listed on the platform to adhere to the U.S Securities and Exchange Commission (SEC) regulations. In addition, the firm must follow Marketplace Rules for Nasdaq listing, including the 4350, 4351, and 4360 corporate governance rules. Companies listed on NASDAQ must have a minimum number of publicly traded shares (1,250 000 in 2022) during the IPO launch, excluding those owned by directors and other parties closely associated with the company. NASDAQ charges the company a fee based on the number of shares issued to investors on the platform. This figure currently ranges between one hundred thousand and one hundred and fifty thousand dollars. The shares must also be sold above a minimum agreed price ($4.00 in 2022). The platform also charges application fees of between five thousand to twenty-five thousand dollars depending on the type of securities listed and the company’s size. NASDAQ also charges other fees such as annual listing fees, record-keeping fees, and fees for issuing additional shares. NASDAQ also has strict financial standards that cover significant aspects such as the company’s earnings, capitalization, and assets. The company must maintain these standards to continue trading on the platform, and failure to meet them results in delisting. The most common cause for delisting share prices falling below the minimum and market capitalization. Organized exchanges in the United States such as the NASDAQ and NYSE attract companies in the U.S. and outside. These exchanges have several advantages over other major exchanges in the world. This includes large market capitalization, massive trading volumes, credibility, and ease of doing business. Non-US companies seeking a listing on the NASDAQ must follow all requirements mentioned above. In addition, they must adhere to other standards enforced by the SEC. For example, in August 2021, the SEC approved new listing standards for NASDAQ to promote diversity. The requirement mandates non-US companies listed on NASDAQ to have at least two diverse members in their governing board and disclose their diversity efforts every year. The London Stock Exchange The London Stock Exchange (LSE) is one of the largest and oldest stock exchanges globally (Michie, 2001). Physical trading occurs in the city of London, United Kingdom, but the advancement of technology and favorable laws has seen the LSE move towards online trading. The LSE lists thousands of companies from more than fifty countries worldwide. The LSE is an attractive avenue for multinational companies planning to join the capital market. The exchange is often used as the benchmark for prices and market data for companies operating in Europe. In addition, the LSE seeks to eliminate regional trading barriers and promote global capital markets trade and has partnered with major exchanges in Asia and Africa. Companies that want to be listed on the LSE are approved by the Financial Conduct Authority (FCA) through the United Kingdom Listing Authority (UKLA). After approval by the FCA, the LSE then admits the company to its main market for trading. London Stock Exchange is responsible for the admission to trading of companies to the Main Market. The FCA regulates trading on the platform, and all listed companies must comply with the Rules of the London Stock Exchange (“the rules”). U.S. companies that want to be listed on the LSE can access the listing requirements from the LSE’s official website or trusted parties in the capital market industry, such as the PwC group (PwC, 2012). Bumble Inc. could have chosen to trade on the LSE instead of the NASDAQ. The LSE is more prestigious and gives companies listed on its platforms a blue-chip status than the NASDAQ. However, the perception that only the NYSE and LSE have successful companies has slowly changed due to the presence of several successful blue-chip companies in the NASDAQ platform, such as Apple, Google, and Microsoft. Choosing the NASDAQ presented the company with several advantages. First, technology companies have traditionally done well after listing on NASDAQ, and Bumble Inc. followed this trend and exceeded its expectations on their first trading day. Second, the U.S. capital market is more prominent and thus has higher trading volumes than the United Kingdom and the E.U. The NASDAQ also has fewer listing fees and lower listing requirements than traditional exchanges such as the LSE. Bumble Inc.’s decision to list only on NASDAQ was the best. The company raised twice the expected capital on its first trading day. Interest rates The Bank of England sets interest rate policies in the United Kingdom. The goal of the policies is to keep inflation low and stable within the country. The Bank of England primarily uses two monetary tools to control inflation in the U.K. The first one is setting a specified bank rate that applies to all financial institutions that borrow from the Bank of England. The bank also buys bonds to lower interest rates on loans through quantitative easing (Q.E.). On the other hand, the Federal Open Market Committee sets interest rates in the U.S. References Karmel, R. S. (2009). The Future of the Securities and Exchange Commission as a Market Regulator. U. Cin. L. Rev., 78, 501. Michie, R. (2001). The London stock exchange: A history. OUP Oxford. PwC (2012). Listing in London A guide to premium and standard listings of equity and flotation on AIM. PWC capital markets. https://www.pwc.com/mn/en/capital-markets/assets/mn_successful_listing_in_london_eng.pdf
FINANCIAL MARKETS Below is the assignment, i have attached the previous milestones. This final paper is a continuation from the previous milestones. thank you 7-2 Final Project Submission Good day,
Running Head: FINANCIAL MARKETS 0 Financial Markets Introduction Financial markets are marketplaces where investors trade securities. They are vital features of capitalist economies and include the stock market, forex, bond market, and derivatives (Madura, J. (2020). The stock market is a marketplace that offers companies an avenue to list their shares to traders and investors. The bond market is avenue corporations, and governments use to raise money to finance their investments or projects. Investors buy bonds from these corporations at an agreed interest rate for a specific period. Commodities markets are avenues that offer producers and consumers to exchange different physical products such as agricultural products, precious metals, petroleum products, and soft commodities. Macroenvironment Financial markets are significantly affected by the macroenvironment such as fluctuating political and social climates. The political climate changes include factors such as changes in the government, political instability, legislative changes, military control, etc. The social climate includes current news and events, such as terrorist attacks, wars, riots, etc. Governments make political decisions that affect businesses in their market, such as introducing new taxes, trade tariffs, environmental regulation, labor laws, etc. The most recent case example occurred in China in 2020 when investors in the Ant Group, a subsidiary of the Chinese multinational giant Alibaba, felt the impact of changing political changes when Chinese regulators canceled its IPO (Oxford Analytica, 2020). This illustrates that these factors significantly impact investment options, operations, and returns. Boom and bust cycle Financial markets are also affected by the economic cycles of the country. The most common cycle in most western capitalist economies is the boom-and-bust cycle. The boom period is accompanied by low unemployment rates, wage growth, a bull market, and rising real estate prices. The central bank reduces barriers to obtaining credit through measures such as low-interest rates, and thus individuals and for-profit institutions borrow capital for investment. Subsequently, investors earn high returns from the market, and the economy grows. Companies get raise higher amounts of capital during IPOs launched the bust period. The was recent economic boom in the United States was from 2009-2020. It was known as the ARRA and QE after the American Recovery and Reinvestment Act of 2009 (ARRA). This was a federal program implemented by the Obama government to counter unemployment and steer the economy after the Great Depression of 2008 (Act, 2009). However, the economic growth reaches its peak and stops expanding after some time. This is called the bust cycle. The availability of excess credit from lenders makes individuals and businesses overinvest. The investments in the market outweigh the market demand, and thus they lose value. Financial institutions increase interest rates, making it difficult for individuals and businesses to obtain credit. Investors lose their money and confidence in the market, and consequently, there is limited capital for investment. Companies reduce operating costs, and many people lose their jobs. The increased unemployment rates reduce consumer spending. This period is also called economic recession or depression if it’s more severe and persists for long periods.  Studies show that the 2020 Coronavirus pandemic was a bust which had widespread impact on financial markets (Cumming, 2020). Inflation and interest rates Stakeholders in the financial markets constantly monitor the country’s level of inflation and interest rates. Inflation can be defined as the uncontrolled rise of prices of goods and services in the country. Inflation reduces the purchasing power of a nation’s currency, and thus consumers purchase few goods, businesses record low revenues, and the economy slows down. Scholars have conducted several studies to investigate the relationship between inflation and market performance. These studies show that expected inflation can positively or negatively affect the stock market depending on the government’s fiscal response or the investor’s ability to reduce the associated risks. Interest rates refer to the cost individuals or businesses pay for using another party’s capital to invest. The Federal Open Market Committee sets interest rates in the United States. These rates are often used by financial institutions such as banks to borrow or lend money to each other, and thus, it usually takes at least one year for the rate to have a widespread impact on the economy. However, changing interest rates have an immediate effect on the stock market. Therefore, investors should know the relationship between interest rates and market performance to make informed financial decisions. Governments control inflation by changing fiscal policies in the country, such as raising interest rates. Raising interest rates increases the cost of borrowing for financial institutions. These institutions increase the rate they charge their customers on different credit options such as mortgages and credit cards. Therefore, there is less capital available for investments. The increased costs reduce the amount of money available to consumers to spend, reducing business revenues and profits. Subsequently, businesses have to deal with two factors that affect market performance, earnings, and stock prices; increased borrowing costs and reduced consumer spending Conclusion Financial markets are significantly affected by changes in the microenvironment. Ant Groups ‘ saga with Chinese authorities, show how the extremes of governments control on stock markets. Bonds are issued at fixed rates which does not account for changes in the financial markets, such as inflation. Therefore, the bond market is significantly affected by changes in its external business environment. The prices of products are affected by inflation and other external factors mentioned above. Commodities markets provide investors with a hedge against inflation. They have a low negative correlation compared to stocks and bonds and offer protection from the effects of inflation. References Act, R. (2009). The American Recovery and Reinvestment Act of 2009. Public Law, 111(5), 5-30. Cumming, D. J., Martinez Salgueiro, A., & Sewaid, A. (2020). COVID-19 Bust, Policy Response, and Rebound: P2P vs. Banks. Policy Response, and Rebound: P2P vs. Banks (November 5, 2020). Madura, J. (2020). Financial markets & institutions. Cengage learning. Oxford Analytica. (2020). Halted China IPO sends political and policy signals. Emerald Expert Briefings, (oxan-db).