topic 3 Financial Markets and Instructions

Question 1

what are Primary Capital Markets

Answer 1

used to issue new financial instruments such as bonds and stocks

Question 2

what are Secondary Capital Markets

Answer 2

securities are traded after the company has sold its offering on the primary market. It is also referred to as the stock market.

Question 3

what are the Benefit for investors with securities traded after issue

Answer 3

Securities traded after issue
Provide liquidity and diversification for
investors

Question 4

what’s the differences between Money Markets vs. Capital Markets

Answer 4

Money markets trade debt securities or instruments with maturities of one year or less

Capital markets trade stocks more than one year

Question 5

types of Money Market Instruments

Answer 5

treasury bills-are short government obligation

federal funds - are funds transferred between financial institutions( no more then one day)

banker acceptances- bank guarantied time drafts (payable to vendors for goods)

Question 6

types of Capital Market Instruments

Answer 6

mortgages-(long term)

cooperate bonds- debt securities issued by company’s (long term)

corporate stocks- stock shares represent fundamental corporate ownership rate

Question 7

what are Financial intermediation

Answer 7

they are financial institutions such as:
commercial banks, credit unions, pension funds & insurance companies

Question 8

Why do we need intermediaries

Answer 8

for diversification

for Information

for lower Transaction costs-

Question 9

3 examples that decide Interest Rates

Answer 9

• inflation
• default risk
• liquidity risk

Question 10

what is Inflation

Answer 10

Percentage increase in cost of goods or services over given period of time