LGU Bonds and Local Government Development
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Questions and Answers

Which type of securities are traded in capital markets?

  • Government securities only
  • Foreign exchange securities
  • Debt and equity securities (correct)
  • Short-term securities
  • What is the typical maturity period for long-term securities in capital markets?

  • More than a year (correct)
  • Less than a year
  • Exactly one year
  • Varies depending on the investor
  • Who are the major suppliers of stocks in the capital market?

  • Corporations for stocks and government for bonds (correct)
  • Banks and financial institutions
  • Government for stocks and bonds
  • Individual investors only
  • What characteristic makes long-term securities riskier in comparison to short-term instruments?

    <p>Greater default and market risks</p> Signup and view all the answers

    Which market is considered part of the capital markets along with stock and bond markets?

    <p>Mortgage market</p> Signup and view all the answers

    What distinguishes capital markets from money markets?

    <p>Duration of securities maturity</p> Signup and view all the answers

    What is the function of Treasury Notes and Bonds?

    <p>To be backed by the government's full faith and credit</p> Signup and view all the answers

    Which bond type sells at a discount?

    <p>T-bills</p> Signup and view all the answers

    What type of price risk are Treasury Notes and Bonds subject to?

    <p>Interest rate risk</p> Signup and view all the answers

    What is the purpose of the Bond Market?

    <p>Issuing and trading bonds</p> Signup and view all the answers

    How are T-notes and T-bonds different from T-bills?

    <p>They pay interest semi-annually</p> Signup and view all the answers

    When are T-notes and T-bonds considered to be risk-free investments?

    <p>When they are backed by the government's credit</p> Signup and view all the answers

    What is the main purpose of LGU bonds in the Philippines?

    <p>To attract private institutional capital for development programs</p> Signup and view all the answers

    What does a bond indenture typically specify?

    <p>Term of the bond and interest rates</p> Signup and view all the answers

    How are derivative securities defined?

    <p>Securities whose value is derived from other traded securities</p> Signup and view all the answers

    What is the primary function of derivative securities market?

    <p>Trading derivative securities linked to underlying securities</p> Signup and view all the answers

    Why are LGU bonds considered a potential tool for development?

    <p>To reduce reliance on the national government for program implementation</p> Signup and view all the answers

    In what way do LGU bonds differ from corporate bonds?

    <p>LGU bonds are short-term, while corporate bonds are long-term</p> Signup and view all the answers

    Where does a one-on-one transaction take place between a borrower and a lender?

    <p>Loan market</p> Signup and view all the answers

    In which market are big loans secured using real property, buildings, or big machineries?

    <p>Mortgage market</p> Signup and view all the answers

    Where does the trading involve an independent third party matching prices on orders received to buy and sell a particular security?

    <p>Auction market</p> Signup and view all the answers

    Which market provides the structure for exchanging money between different countries and determining exchange rates?

    <p>Foreign exchange market</p> Signup and view all the answers

    What type of contracts give the holder the right to buy something in the future at a specified price?

    <p>Forward contracts</p> Signup and view all the answers

    What are agreements between two parties for exchanging periodic cash flows based on an underlying instrument or price?

    <p>Swaps</p> Signup and view all the answers

    What is the main difference between the spot market and the futures market?

    <p>Futures market involves trading contracts, while spot market involves immediate purchase of assets.</p> Signup and view all the answers

    What type of contracts are traded in the forward market?

    <p>Contracts involving future delivery of assets</p> Signup and view all the answers

    In which markets can forward contracts be found?

    <p>In the commodity, foreign currency, and interest rate markets</p> Signup and view all the answers

    Where are stock options traded?

    <p>In the options market</p> Signup and view all the answers

    When is a stockholder given stock options by a corporation?

    <p>When they want to maintain their ownership proportion in the corporation</p> Signup and view all the answers

    What happens if a stockholder does not want to exercise their stock options?

    <p>They can sell the options in the options market</p> Signup and view all the answers

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