Money Markets and Capital Markets

Question 1

Money Markets

Answer 1

Money Markets refers to markets where debt securities with maturities is less than one year are traded

Question 2

Why Money Markets consider dealer-driven markets?

Answer 2

Because most transaction involve dealers who buy or and sell instruments at their own risk
The dealer is a principal in most transactions , unlike stockbroker who acts as an agent

Question 3

Money Markets securities are generally short term and marketable they usually have ……. …………. risk

Answer 3

Low default risk

Question 4

Money Markets securities Include / Examples

Answer 4

Government treasury bills
Government treasury notes and bonds
federal agency securities
Short term tax exempt securities
Commercial Paper
Certificates of deposit
Repurchase agreements
Eurodollar CDs
Bankers' acceptances

Question 5

Where is Money Markets Exist ?

Answer 5

New York , London and Tokyo

Question 6

Capital Markets

Answer 6

Refers to Markets where long term debt and equity instruments are traded

Question 7

Example of Capital Markets

Answer 7

New York Stock Exchange

Question 8

financial markets that trade debt securities with maturities of less than 1 year and are dealer-driven are
A. Primary markets.
B. Capital markets.
C. Secondary markets.
D. Money markets

Answer 8

Answer (D) is correct.
Money markets trade debt securities with maturities of less than 1 year.
These markets are dealer-driven because dealers are the principals who buy and sell instruments at their own risk. Money markets are marketable and short-term with low default risk. They can be found in New York, London, and Tokyo.

Question 9

Which of the following financial instruments can be traded in international money markets?
A. Mortgages.
B. Preferred stocks.
C. Government treasury bills.
D. Government treasury bonds.

Answer 9

Answer (C) is correct.
Funds are borrowed or lent for short periods (less than 1 year) in money markets. Examples of instruments traded in money markets are U.S. Treasury bills, bankers’ acceptances, commercial paper, negotiable
certificates of deposit, money market mutual funds, Eurodollar market time deposits, and consumer credit loans. Capital markets trade stocks and long-term debt.