Capital Market
- EquityEquity
- Debt
- DerivativesDerivatives
- Foreign exchange
- Commodities
MoneyMoney-marketMoney Market
- Short-term debt
- Commercial Paper
- Treasury Bills
- Repurchase agreements
- Bankers’ acceptances
A capital market is a market for long-term debt or equity securities. These securities are issued by large publicly held corporations, governments, or other large institutions. The capital market is where companies raise money to finance their operations and growth.
Equity is a type of security that represents ownership in a company. When you buy SharesShares of stock, you become a part-owner of the company. Equity securities are considered to be riskier than debt securities, but they also offer the potential for higher returns.
Debt is a type of security that represents a loan from an investor to a company. When you buy a bond, you are lending money to the company. Debt securities are considered to be less risky than equity securities, but they also offer lower potential returns.
Derivatives are financial instruments that derive their value from another asset, such as a stock, bond, or commodity. Derivatives are often used to hedge against risk or to speculate on the future price of an asset.
Foreign exchange is the market for exchanging currencies. The Foreign exchange market is the largest financial market in the world, with daily trading volumes of over $5 trillion.
Commodities are raw materials that are used to produce goods and services. Commodities markets are used to trade these raw materials, such as oil, gold, and wheat.
A money market is a market for short-term debt instruments. These instruments are typically issued by governments, corporations, and banks. The money market is used to raise short-term cash and to invest excess cash.
Short-term debt is a type of debt that has a maturity of one year or less. Short-term debt is often used to finance working capital needs or to meet short-term cash flow requirements.
Commercial paper is a type of short-term debt that is issued by corporations. Commercial paper is typically unsecured and has a maturity of 270 days or less.
Treasury bills are a type of short-term debt that is issued by the U.S. government. Treasury bills are considered to be very safe investments and are often used as a benchmark for other short-term debt instruments.
Repurchase agreements are a type of short-term debt that is used by banks to finance their operations. Repurchase agreements are essentially loans that banks make to each other.
Bankers’ acceptances are a type of short-term debt that is used by businesses to finance their imports and exports. Bankers’ acceptances are essentially letters of credit that are issued by banks.
The capital market and the money market are two important parts of the financial system. The capital market is where companies raise money to finance their operations and growth. The money market is where short-term debt instruments are traded. Both markets are essential for the smooth functioning of the economy.
Equity
What is equity?
Equity is a type of security that represents ownership in a company. When you buy equity, you are buying a piece of the company.What are the different types of equity?
There are two main types of equity: common stock and preferred stock. Common stock gives you the right to vote on company matters and to share in the company’s profits. Preferred stock gives you a fixed dividend, but you do not have the right to vote.How do I buy equity?
You can buy equity through a stockbroker or through an online brokerage account.What are the risks of investing in equity?
The main risk of investing in equity is that the value of your InvestmentInvestment can go down. This is because the value of a company’s stock is based on the company’s performance. If the company does poorly, the value of its stock will go down.What are the rewards of investing in equity?
The main reward of investing in equity is the potential for high returns. If the company does well, the value of its stock will go up. This means that you can make a lot of money if you invest in a company that does well.
Debt
What is debt?
Debt is a type of security that represents a loan. When you buy debt, you are lending money to the issuer of the debt.What are the different types of debt?
There are two main types of debt: BondsBonds and loans. Bonds are loans that are issued by governments or companies. Loans are loans that are made by banks or other financial institutions.How do I buy debt?
You can buy debt through a stockbroker or through an online brokerage account.What are the risks of investing in debt?
The main risk of investing in debt is that the issuer of the debt may not be able to repay the loan. This is called default. If the issuer defaults, you may lose your investment.What are the rewards of investing in debt?
The main reward of investing in debt is the potential for income. When you buy debt, you are essentially lending money to the issuer of the debt. The issuer of the debt will pay you interest on your loan. This interest income can be a good source of income for your portfolio.
Derivatives
What is a derivative?
A derivative is a financial instrument that derives its value from another asset. For example, a call option is a derivative that gives the buyer the right, but not the obligation, to buy an underlying asset at a specified price on or before a specified date.What are the different types of derivatives?
There are many different types of derivatives, but some of the most common include OptionsOptions, futures, and swaps.How do I trade derivatives?
You can trade derivatives through a broker or through an exchange.What are the risks of trading derivatives?
Derivatives can be very risky investments. The value of a derivative can change rapidly, and you can lose a lot of money very quickly.What are the rewards of trading derivatives?
Derivatives can also be very profitable investments. If you are able to correctly predict the movement of the underlying asset, you can make a lot of money.
Foreign exchange
What is foreign exchange?
Foreign exchange is the buying and selling of currencies. When you buy or sell a currency, you are essentially exchanging one currency for another.Why do people trade foreign exchange?
People trade foreign exchange for a variety of reasons. Some people trade foreign exchange to make a profit. Others trade foreign exchange to hedge against risk. And still others trade foreign exchange to facilitate international trade.How do I trade foreign exchange?
You can trade foreign exchange through a broker or through an exchange.What are the risks of trading foreign exchange?
The risks of trading foreign exchange include market risk, liquidity risk, and counterparty risk.What are the rewards of trading foreign exchange?
The rewards of trading foreign exchange include the potential for high returns and the ability to hedge against risk.
Commodities
What is a commodity?
A commodity is a good that is bought and sold on an exchange. Some common commodities include oil, gold, and wheat.Why do people trade commodities?
People trade commodities for a variety of reasons. Some people trade commodities to make a profit. Others trade commodities to hedge against risk. And still others trade commodities to facilitate international trade.How do I trade commodities?
You can trade commodities through a broker or through an exchange.What are the risks of trading commodities?
The risks of trading commodities include market risk, liquidity risk, and counterparty risk.
Question 1
Which of the following is a type of equity?
(A) Common stock
(B) Preferred stock
(CC) Warrants
(D) All of the above
Answer
(D) All of the above
Common stock is a type of equity that gives the holder a claim on the company’s assets and earnings. Preferred stock is a type of equity that gives the holder a fixed dividend and a preference over common stockholders in the event of liquidation. Warrants are a type of equity that gives the holder the right to purchase common stock at a specified price.
Question 2
Which of the following is a type of debt?
(A) Corporate bonds
(B) Government Bonds
(C) Municipal bonds
(D) All of the above
Answer
(D) All of the above
Corporate bonds are a type of debt that is issued by corporations. Government bonds are a type of debt that is issued by governments. Municipal bonds are a type of debt that is issued by state and local governments.
Question 3
Which of the following is a type of derivative?
(A) Futures contracts
(B) Options contracts
(C) Swaps
(D) All of the above
Answer
(D) All of the above
Futures contracts are agreements to buy or sell an asset at a specified price on a specified date in the future. Options contracts are agreements to buy or sell an asset at a specified price on or before a specified date in the future. Swaps are agreements to exchange one financial instrument for another.
Question 4
Which of the following is a type of foreign exchange?
(A) The US dollar
(B) The euro
(C) The Japanese yen
(D) All of the above
Answer
(D) All of the above
The US dollar, the euro, and the Japanese yen are all examples of foreign exchange. Foreign exchange is the currency of another country.
Question 5
Which of the following is a type of commodity?
(A) Gold
(B) Oil
(C) Silver
(D) All of the above
Answer
(D) All of the above
Gold, oil, and silver are all examples of commodities. Commodities are raw materials that are used to produce goods and services.
Question 6
Which of the following is a type of short-term debt?
(A) Commercial paper
(B) Treasury bills
(C) Repurchase agreements
(D) Bankers’ acceptances
Answer
(A) Commercial paper
Commercial paper is a type of short-term debt that is issued by corporations. Treasury bills are a type of short-term debt that is issued by the US government. Repurchase agreements are a type of short-term debt that is used by banks to borrow money from other banks. Bankers’ acceptances are a type of short-term debt that is used by businesses to finance international trade.
Question 7
Which of the following is a type of money market instrument?
(A) Commercial paper
(B) Treasury bills
(C) Repurchase agreements
(D) All of the above
Answer
(D) All of the above
Commercial paper, Treasury bills, and repurchase agreements are all examples of Money Market Instruments. Money market instruments are short-term debt instruments that are used by businesses and investors to manage their cash flow.