Explain the difference between (a) public offerings and private placem

Explain the difference between (a) public offerings and private placements, (b) primary markets and secondary
markets, (c) the money market and the capital market, and (d) organized security exchanges and
over-the-counter markets.

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ANSWER

In a public offering, securities are usually made available to the public at large by an investment-banking firm, which
is a firm that specializes in helping other firms raise money. In a private placement, also called a direct placement, the
securities are offered and sold directly to a limited number of investors. The firm will usually deals directly with the
prospective buyers. In this setting, the investment-banking firm may act as a finder by bringing together potential
lenders and borrowers.
A primary market is a market in which new, as opposed to previously issued, securities are traded. The secondary
market is where currently outstanding securities are traded.
The money market refers to transactions in short-term debt instruments, with “short-term” meaning maturity periods
of 1 year or less. The capital market refers to the market for long-term financial instruments. “Long-term” here means
having maturity periods that extend beyond 1 year.
Organized security exchanges are tangible entities; that is, they physically occupy space (such as a building or part of a
building), and financial instruments are traded on their premises. The over-the-counter markets include all security
markets except the organized exchanges.