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Financial Market Fundamentals

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Questions and Answers

Which of the following is NOT considered a type of money market instrument?

Certificates of deposit (CDs)

Treasury bills (T-bills)

Corporate bonds (correct)

Commercial paper

What is the main difference between money markets and capital markets?

Money markets are more regulated than capital markets.

Money markets trade short-term debt instruments, while capital markets trade long-term debt instruments.

Money markets trade stocks and bonds, while capital markets trade commodities and currencies.

Money markets facilitate borrowing and lending for short durations, while capital markets facilitate long-term investment and financing. (correct)

Why are Treasury bills considered one of the safest money market instruments?

They are secured by collateral, ensuring repayment.

They have long maturities, reducing the risk of default.

They offer high interest rates, providing a greater return on investment.

They are backed by the government, minimizing default risk. (correct)

Which regulatory body oversees the functioning of capital markets in the United States?

Securities and Exchange Commission (SEC) (C) Signup and view all the answers

Which investment banks assist companies in raising capital through initial public offerings (IPOs), debt offerings, and providing advisory services for mergers and acquisitions?

Investment banks (B) Signup and view all the answers

Which market indices represent a benchmark of the overall performance of the capital market?

S&P 500 (A) Signup and view all the answers

Which one of the following is a characteristic of money market instruments?

Backed by high-quality issuers (C) Signup and view all the answers

What is the purpose of money market instruments?

To manage short-term cash needs (D) Signup and view all the answers

What is the primary market in capital markets?

Where newly issued securities are bought and sold for the first time (A) Signup and view all the answers

What are stocks in capital markets?

Ownership shares in a company (A) Signup and view all the answers