Which of the following statements best describes financial markets?
A)Capital market transactions involve only the purchase and sale of equity securities, i.e., common stocks.
B)If an investor sells shares of stock through a broker, then this would be an indirect finance transaction.
C)Money market mutual funds have a high degree of default risk.
D)Commercial papers have maturities longer than one year.

Question

Quizplus · Accepted Answer

Financial markets refer to the mechanisms that allow lenders and borrowers to exchange funds. Capital markets involve the buying and selling of long-term securities like stocks and bonds. If an investor sells shares of stock through a broker, they're using an intermediary in an indirect finance transaction. Money market mutual funds typically invest in short-term, low-risk securities like government bonds, making them relatively safe investments. Commercial papers are short-term, unsecured promissory notes issued by corporations to raise funds, with maturities usually less than 270 days.

Which of the Following Statements Best Describes Financial Markets