Companies utilize capital markets to raise money for projects by issuing stock IPOs, bonds and short-term money market securities. Individual investors wish to earn interest or dividends on their savings can meet companies looking to raise funds by issuing securities.
To illustrate how a corporate bond moves through capital markets, suppose AB Co. needs to raise $1000. AB Co. offers a 10-year bond on the bond market with a par value of $1000. The bond is purchased by someone wishing to earn interest on the $1000 that they have available. AB Co. receives the $1000 in cash and the investor receives a bond and the promise of repayment plus interest. Should the bondholder later decide he no longer wants the bond, he can sell it to another investor in the marketplace.
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A good idea remains just that, a good idea, until you act on it. If you have an idea to start a company for instance, you don't have to have everything figured out before you take action on it. However, as with every idea, we often get concerned with how and where the Capital is going to come from. Well, what a majority of companies do, is raise capital by engaging in long-term investments like shares (selling shares of their company), and bonds. By making such investments, they are able to consistently raise money enough to manage the company and stay in business. But of course, you don't just sell shares anywhere, there are safe places designated for just this activity. This is what is called the Capital Market.
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