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Primary Market Investment Risks
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Primary Market Investment Risks
📊 Part 1: Understanding Primary Market Risks
1. What is the primary market?
Where existing shares are traded between investors
Where companies issue new shares to raise capital
Where government bonds are sold
Where foreign currencies are exchanged
2. Which of these are risks when investing in the primary market? (Select all that apply)
The company may fail and lose all value
Share prices may fall after the initial public offering (IPO)
Limited information about new companies
Guaranteed profits within one year
3. What does 'market risk' mean in primary market investing?
The risk that the entire stock market may decline
The risk of buying too many shares
The risk of not having enough money
The risk of missing out on investments
4. Complete the sentence: Liquidity risk in the primary market means ________________
that you may not be able to ________________ your investment quickly when you need the money.
💡 Part 2: Risk Analysis
5. Explain why investing in a new company's IPO might be riskier than buying established company shares. Give two reasons.
Reason 1: ___________________________________________________
_________________________________________________________
Reason 2: ___________________________________________________
_________________________________________________________
6. A new technology company is offering shares at £5 each. After one month, the shares are worth £3 each. Calculate the percentage loss for an investor who bought 100 shares.
Percentage loss: _______%
7. How can investors reduce risks when investing in the primary market? Suggest three strategies.
1. ______________________________________________________
2. ______________________________________________________
3. ______________________________________________________
🎯 Part 3: Real-World Application
8. Case Study: TechStart Ltd is launching an IPO. They plan to use the money to develop new software, but they have no proven track record and face competition from established companies. List four specific risks an investor should consider.
Risk 1: __________________________________________________
Risk 2: __________________________________________________
Risk 3: __________________________________________________
Risk 4: __________________________________________________
9. Extension Activity: Research a real company that went public in the last two years. Explain what happened to their share price in the first six months and identify what risks materialised.
Company name: ____________________________________________
Share price performance: ___________________________________
_________________________________________________________
Risks that occurred: _______________________________________
_________________________________________________________
_________________________________________________________
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