Podcast
Questions and Answers
The money market deals with short term papers that have a maturity period of more than one year.
The money market deals with short term papers that have a maturity period of more than one year.
False
Money market funds invest in highly liquid, short-term cash equivalent instruments.
Money market funds invest in highly liquid, short-term cash equivalent instruments.
True
Islamic money market operations primarily use interest rate-based instruments for funding.
Islamic money market operations primarily use interest rate-based instruments for funding.
False
The central bank conducts daily monetary operations to influence the liquidity in the banking system.
The central bank conducts daily monetary operations to influence the liquidity in the banking system.
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The main funding instrument in the Islamic interbank market is the Qard acceptance.
The main funding instrument in the Islamic interbank market is the Qard acceptance.
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Participation in the ringgit interbank money market is limited to unapproved financial institutions.
Participation in the ringgit interbank money market is limited to unapproved financial institutions.
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Money market instruments are considered high risk due to their low liquidity.
Money market instruments are considered high risk due to their low liquidity.
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The debt and equity markets fall under the capital market classification.
The debt and equity markets fall under the capital market classification.
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The Bank uses Commodity Murabahah Programme mainly with crude palm oil-based contracts.
The Bank uses Commodity Murabahah Programme mainly with crude palm oil-based contracts.
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The debt market includes trading of only government securities.
The debt market includes trading of only government securities.
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The equity market allows shareholders to sell their securities after purchase.
The equity market allows shareholders to sell their securities after purchase.
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The capital market encompasses financial assets with a maturity period of less than one year.
The capital market encompasses financial assets with a maturity period of less than one year.
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In Malaysia, Shariah compliant stocks are traded on the Bursa Malaysia in three submarkets.
In Malaysia, Shariah compliant stocks are traded on the Bursa Malaysia in three submarkets.
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The Bank manages liquidity by only inviting individual investors to place surplus funds.
The Bank manages liquidity by only inviting individual investors to place surplus funds.
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The equity market serves as a vehicle to transfer funds from deficit to surplus units.
The equity market serves as a vehicle to transfer funds from deficit to surplus units.
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Islamic equity products must comply with certain requirements.
Islamic equity products must comply with certain requirements.
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The Main Market is designed exclusively for newly established companies.
The Main Market is designed exclusively for newly established companies.
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The ACE Market was previously known as the MESDAQ Market.
The ACE Market was previously known as the MESDAQ Market.
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In the primary market, shares are traded after they have been issued.
In the primary market, shares are traded after they have been issued.
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An IPO allows a private company to issue stock to the public for the first time.
An IPO allows a private company to issue stock to the public for the first time.
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Investors in the secondary market buy and sell previously issued securities without the involvement of the issuing companies.
Investors in the secondary market buy and sell previously issued securities without the involvement of the issuing companies.
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The primary market is also referred to as the New Issue Market.
The primary market is also referred to as the New Issue Market.
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Forward contracts are used to hedge risks in financial operations.
Forward contracts are used to hedge risks in financial operations.
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Options provide an obligation to engage in future transactions on certain securities.
Options provide an obligation to engage in future transactions on certain securities.
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Islamic equity products can involve gambling activities if they comply with Shariah principles.
Islamic equity products can involve gambling activities if they comply with Shariah principles.
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Futures contracts are standardized agreements traded on futures exchanges.
Futures contracts are standardized agreements traded on futures exchanges.
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Underwriting firms are hired to assess the market capitalization of a company during its IPO.
Underwriting firms are hired to assess the market capitalization of a company during its IPO.
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Swap contracts are not considered derivative instruments.
Swap contracts are not considered derivative instruments.
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The price of the underlying instrument in a futures contract must be paid before the delivery of the asset.
The price of the underlying instrument in a futures contract must be paid before the delivery of the asset.
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A call option gives the holder the right to sell a specified quantity of a security.
A call option gives the holder the right to sell a specified quantity of a security.
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Participants in forward contracts are obligated to complete the transaction at the agreed price and time.
Participants in forward contracts are obligated to complete the transaction at the agreed price and time.
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Hedging through derivatives is only for producers and manufacturers.
Hedging through derivatives is only for producers and manufacturers.
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Study Notes
Market Structure and Classifications
- The chapter is about market structures and classifications.
- The document outlines different types of markets, including money markets, capital markets, and others.
Money Market
- It deals with short-term financial instruments with maturity periods of one year or less.
- Money market funds invest in highly liquid, short-term, cash equivalents.
- Banks issue commercial papers for short-term cash needs.
- Money market funds balance daily deposits by buying instruments.
- Money market funds lend to banks.
- Islamic money market operations are conducted by central banks to achieve desired liquidity.
- Mechanisms are employed for approved interbank institutions.
Capital Market
- It's a market for medium to long-term financial assets.
- It encompasses corporate stocks, public and private debt securities and shares.
- Maturities exceed one year and have no fixed maturity.
- Traded through stock markets, government bond markets, and private debt markets.
Debt Market
- A market for trading debt securities.
- Companies and governments use this to raise long-term funds.
- Includes private placements and organized markets.
- Traded instruments pay interest.
- Examples: bonds, sukuk, loans.
Equity Market
- A market for buying and selling securities (shares).
- Shareholders have the right to sell their securities.
- Islamic equity markets allow fund transfer between surplus to deficit units.
- Investment decisions are based on preference, risk tolerance, return, and timeframe.
- Malaysia's equity market is categorized into Main Board, Second Board, and MESDAQ markets.
Islamic Equity Product
- Must comply with Shariah requirements.
- Underlying instruments are free from interest, forbidden activities (e.g., gambling, pork).
- Structure based on Shariah compliant concepts and product contracts.
Primary and Secondary Markets
- Primary Market—Companies issue new securities for the first time (IPO).
- Investors have a first opportunity to buy shares.
- Secondary Market—Previously issued securities are bought and sold.
- Investors trade with each other; issuing companies aren't directly involved.
Forward, Future, and Options Market
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These are derivative financial instruments related to forwards, futures, options, and swaps.
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These are commonly used by producers and manufacturers to hedge risks.
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Their value is based on underlying assets.
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Forward: Agreement to buy or sell an asset at a specified time in the future.
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Set price before control of the underlying instrument changes.
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Used for hedging risk or speculation.
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Future: Standardized contract traded on exchanges to buy or sell at a future date/price.
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Settlement happens at the settlement date.
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Option: A right (not obligation) to buy/sell an asset at a predetermined price/time.
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Holder doesn't have to exercise the rights.
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Description
This quiz explores various market structures including money markets and capital markets. Learn about different financial instruments, their trading mechanisms, and the characteristics that define each market type. Test your knowledge on short-term and long-term financial assets.
