Capital Markets vs Money Markets: Key Differences Explained

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Questions and Answers

What is the main characteristic of direct lending?

Involves an intermediary but not a broker

Transfer of funds between buyer and seller

Funds transferred without an intermediary (correct)

Involves an intermediary

Which of the following is an example of direct financing method?

Private placements (correct)

Dealer

Investment banker

Broker

What is the role of an investment banker?

Take title to the securities traded

Act as an intermediary between buyers and sellers

Handle financial transactions for individuals

Provide financial advice and underwrite new securities (correct)

Which element/component of the Philippine financial system involves the buying and selling of stocks, bonds, and other securities?

Financial market Signup and view all the answers

What is one of the main functions of the financial system mentioned in the text?

Providing payment mechanisms Signup and view all the answers

Which sector of the economy gets credit from the financial system for borrowing and lending?

Household, business, and government Signup and view all the answers

What advantage does the financial system offer in terms of risk sharing?

Sharing risks between savers and borrowers Signup and view all the answers

What is liquidity in the financial system context?

The ease of exchanging assets for money Signup and view all the answers

Which market deals with low-risk debt instruments that mature in one year or less?

Money Market Signup and view all the answers

Where is the Deutsche Bundesbank located?

Frankfurt, Germany Signup and view all the answers

What is the main responsibility of the Bangko Sentral ng Pilipinas?

Regulating Banks Signup and view all the answers

In which market are bond and equity shares with long-term maturities traded?

Capital Market Signup and view all the answers

What is the main responsibility of the Bangko Sentral ng Pilipinas (BSP) according to the text?

Formulating monetary policies Signup and view all the answers

Who was the first Governor of the Bangko Sentral ng Pilipinas (BSP)?

Miguel Cuaderno Sr. Signup and view all the answers

What is one of the objectives of the BSP as mentioned in the text?

Maintaining stable prices for economic growth and employment Signup and view all the answers

When was the BSP established according to the text?

July 3, 1993 Signup and view all the answers

Study Notes

Financial System

Direct lending is characterized by a direct financial relationship between the lender and the borrower.

Financing Methods

An example of a direct financing method is borrowing from friends and family.

Investment Banker's Role

An investment banker acts as an intermediary between issuers of securities and investors.

Philippine Financial System

The capital market is the element of the Philippine financial system that involves the buying and selling of stocks, bonds, and other securities.

Functions of the Financial System

One of the main functions of the financial system is to facilitate the transfer of funds from savers to borrowers.

Financial System Sectors

The household sector of the economy receives credit from the financial system for borrowing and lending.

The financial system offers the advantage of risk sharing by allowing companies to share their risks with investors.

Liquidity

In the financial system context, liquidity refers to the ability to convert assets into cash quickly and at a low cost.

Money Market

The money market deals with low-risk debt instruments that mature in one year or less.

Deutsche Bundesbank

The Deutsche Bundesbank is located in Germany.

Bangko Sentral ng Pilipinas (BSP)

The main responsibility of the Bangko Sentral ng Pilipinas (BSP) is to maintain price stability and promote a healthy financial system.
The BSP is responsible for regulating and supervising banks and other financial institutions.

Capital Market

The capital market is where bond and equity shares with long-term maturities are traded.

BSP Objectives

One of the objectives of the BSP is to promote a healthy financial system.

BSP History

The Bangko Sentral ng Pilipinas (BSP) was established in 1993.
The first Governor of the Bangko Sentral ng Pilipinas (BSP) was Miguel Cuaderno.

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Description

Learn the distinctions between money market and capital market, including examples of instruments found in each. Explore the role of Deutsche Bundesbank as the central bank of Germany.