Podcast
Questions and Answers
What is a primary characteristic of money market instruments?
What is a primary characteristic of money market instruments?
What role does the National Bank play in the money markets of Ethiopia?
What role does the National Bank play in the money markets of Ethiopia?
Which of the following is NOT typically considered a money market instrument?
Which of the following is NOT typically considered a money market instrument?
How do capital market instruments generally differ from money market instruments?
How do capital market instruments generally differ from money market instruments?
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What is one main purpose of firms operating in money markets?
What is one main purpose of firms operating in money markets?
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Which of these statements correctly describes capital markets?
Which of these statements correctly describes capital markets?
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What is the typical maturity range for capital market instruments?
What is the typical maturity range for capital market instruments?
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Which of these is an implication of the lower marketability of capital assets?
Which of these is an implication of the lower marketability of capital assets?
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What commonly influences a firm's decision to issue securities in capital markets?
What commonly influences a firm's decision to issue securities in capital markets?
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Which of the following correctly describes the risk associated with capital market instruments?
Which of the following correctly describes the risk associated with capital market instruments?
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Study Notes
Money Markets
- Markets where banks and businesses adjust liquidity by borrowing, lending, or investing short-term.
- Typical maturities are less than one year.
- Instruments are highly liquid and low-risk.
- No formal exchange exists.
- Dealers and brokers specialize in instruments like treasury bills, certificates of deposit, commercial paper, and federal funds.
- The central bank (in Ethiopia) conducts monetary policy in these markets.
Capital Markets
- Markets for financing capital goods (long-term assets).
- Financing using stocks or long-term debt.
- Less liquid than money market instruments; default risk varies between issuers; maturities are 5-30 years.
- Main instruments include common stock, corporate bonds, and mortgages.
- Capital assets are often less marketable.
- Firms finance capital with long-term debt or equity to lock in costs and avoid refinancing problems.
- Firm motives in capital markets differ from money markets. Money market firms warehouse funds or borrow temporarily. Capital market firms acquire assets (plant, equipment) to generate profit.
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Description
Explore the key concepts of money and capital markets through this comprehensive quiz. Understand the differences between short-term liquidity adjustments and long-term financing options using various financial instruments. Test your knowledge on the roles of banks, central banks, and financial instruments in these markets.
