Capital Markets and Money Markets Quiz

Study Notes

Capital Market Securities

Two primary securities are stocks and bonds, which are essential for long-term financing.
Stocks represent ownership in a company, while bonds are debt instruments indicating loans made by investors to borrowers.

Primary Market

Serves as a platform where new securities are issued and sold for the first time.
Companies and governments raise capital directly from investors through initial public offerings (IPOs) or bond issues.

Secondary Market

Provides a venue for investors to buy and sell previously issued securities.
Helps facilitate liquidity and price discovery, enabling easier transactions of capital market securities.

Bond Interest Payments

Interest payment, or coupon, is usually determined by the bond's stated interest rate and its par value.
This rate is set at issuance and remains fixed throughout the bond's life, influencing the periodic payments to bondholders.

Maturity Date

Represents the date when the bond's principal amount is due to be repaid to bondholders.
Varies among bonds; can range from short-term (less than a year) to long-term (up to 30 years or more).

Temporary Investment Market

The money market is primarily used by investors for temporary or transaction purposes.
Suitable for short-term investments, offering liquidity with instruments like Treasury bills and commercial paper.

Par Value of a Bond

Par value, or face value, is the amount paid back to bondholders at maturity.
Typically set at $1,000 for corporate bonds, serving as a baseline for calculating interest payments.

Maturity Date for Treasury Bonds

Treasury bonds typically have longer maturities, ranging from 10 to 30 years.
Offers investors a stable income stream through interest payments over an extended period until maturity.

Description

Test your knowledge on capital markets and money markets with this quiz! Learn about the primary securities in the capital market, the role of households in owning stocks and bonds, and the purpose of the primary market for issuing securities.