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Financial Markets Part II
Th
e S
tock M
ark
et
Div
iden
ds
Capit
al G
ain
s
Tota
l R
etu
rn
Init
ial Pu
blic O
fferi
ng
Init
ial Pu
blic O
fferi
ng
Secon
dary
Tra
din
g
Mark
et
Flu
ctu
ati
on
s
Ch
an
gin
g E
xpecta
tion
s
Ch
art
: C
han
gin
g
Expecta
tion
s
B
A
Initial demand for stock
New demand for stock
Quantity of Stock (shares per day)
Pri
ce (dollars
per
sh
are
)
New supply of stock
Initial supply of stock
Th
e V
alu
e o
f In
form
ati
on
Boom
s a
nd B
usts
Boom
s a
nd B
usts
Boom
s a
nd B
usts
Resou
rce A
llocati
on
s
Th
e B
on
d M
ark
et
Th
e B
on
d M
ark
et
Bon
d I
ssu
an
ce
Bon
d I
ssu
an
ce
Bon
d I
ssu
an
ce
Bon
d I
ssu
an
ce
Bon
d T
radin
g
Bon
d T
radin
g
Bon
d T
radin
g
Bon
d T
radin
g
Cu
rren
t Y
ield
s
Ch
art
: S
hift
in F
un
ds
Su
pply
Quantity of Funding (millions of dollars per year)
Inte
rest
Rate
(perc
en
t per
year)
A
B
Initial supply of loanable
funds
Later supply
16
10
Ven
ture
Capit
alists
–
Fin
an
cin
g T
om
orr
ow
’s
Pro
du
cts
THE END