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Homework answers / question archive / 1) What financial market might a project sponsor go to, to secure funding for a new basketball stadium in Los Angeles that could cost up to $3 billion dollars? Be specific in your response with an in-depth explanation
1) What financial market might a project sponsor go to, to secure funding for a new basketball stadium in Los Angeles that could cost up to $3 billion dollars? Be specific in your response with an in-depth explanation.
2. What is the difference between primary vs secondary markets? Give examples.
?3. Fifteen (15) years ago, your parents purchased an investment for $2,500. If the investment earned 6 percent interest each year, how much is it worth today? For this question, you must show the formula and/or process that led to the solution. This is required for a finance class like ours. I will not give credit for solutions without the formula/process as stated.
Ans1. The project sponsor can go for bonds in capital market to secure funding for a new basketball stadium in Los Angeles that could cost up to $3 billion dollars.
Bonds are a financial instrument used to finance projects, in return the bond issuer promises to pay interest every year.
The various types of bonds are Zero coupon bonds, Inflation indexed bonds, Convertible bons, Short-term bonds.
The sponsor can opt for Zero Coupon Bonds. Interest is not paid every year on Zero Coupon Bonds. Instead loans are taken at a discounted rate and at the end of maturity period the full amount is reedemed. Here the sponsor will not have to worry for interest payments and the long term fund can be raised easily.
Ans2. Primary market is the market where the newly issued securities are sold for the first time through IPO (Initial Public Offer).
Secondary market is the market for old/existing securities.
In primary market investors buy IPO before shares are listed in the stock market.
Secondary market is represented by stock exchange and the price of securities are determined by market forces.
Example of primary market is IPO.
Example of secondary market is London Stock Exchange.
Ans3. The investment is worth $ 5991.395 today.
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