Question

Please verify if these answers are correct or incorrect! I think I may be missing something on the capital markets question...

Identify the financial instruments based on the following descriptions Description Financial Instrument Issued by nonfederal government entities, these financialState and local government bonds instruments are debt securities that fund their capital expenditures. They are exempt from most taxes imposed in the area where the securities are issued Issued by money-centered financial firms, these short- orCertificates of deposit medium-term insured debt instruments pay higher interest than a regular savings account. They are low-risk instruments and have low returns. These financial instruments are investment pools that buy such Money market mutual funds short-term debt instruments as Treasury bills (T-bills), certificates of deposit (CDs), and commercial paper. They can be easily liquidated These financial instruments are contractual agreements that [ give one party a long-term agreement to use an asset by providing regular payments. Leases Which of the following instruments are traded in the capital markets? Check all that apply. Common stocks Preferred stocks Commercial paper Certificates of deposit X Corporate bonds

Answer 1

Capital market is a place where the long-term instruments are traded. It consists of primary market and secondary market. Commercial papers and certificate of deposits are short-term instruments that have maturity of less than one year and are traded in money market. Therefore, the instruments that are traded in capital markets are: Common stock Preferred stock Corporate bonds The correct answers are Option A, Option B and Option E