the financial markets allocate capital to corporations by
A. reflecting expectations of the market participants in the prices of the corporation's securities
B. requiring higher returns from companies with lower risk than their competitors
C. rewarding companies with expected high returns with lower relative stock prices
D. relying on the opinion of investment bankers
finalcial markets bring companies with surplus money together with companies that need money. Fincial banking houses buy securities from companies that need money and the resell the securities to company with surplus money in a fincial market. I don't think the market allocates capital to corporations....I think the banking houses buy corporate securities.....
I like A as the best answer....
reflecting expectations of the market participants in the prices of the corporation's securities
Is this correct???
'A' is the answer
Yes, you are correct! Option A, "reflecting expectations of the market participants in the prices of the corporation's securities," is the most accurate answer. The financial markets allocate capital to corporations by reflecting the expectations and assessments of market participants in the form of changes in the prices of a corporation's securities, such as stocks and bonds.
When investors buy or sell securities in the financial markets, they are essentially signaling their expectations and perceptions of a company's future prospects. If there is positive sentiment and high expectations for a company, the demand for its securities will increase, leading to higher prices. This, in turn, allows the company to access more capital by issuing new securities or selling existing ones at a higher price.
On the other hand, if market participants have negative expectations or concerns about a company's prospects, the demand for its securities will decrease, which can result in lower prices. This may make it more difficult for the company to raise capital at favorable terms.
In summary, the financial markets allocate capital to corporations by reflecting the expectations and assessments of market participants in the prices of the corporation's securities.