FINANCIAL MARKETS AND INSTITUTIONS COMPREHENSIVE EXAM SCRIPT VERIFIED QUESTIONS AND SOLUTIONS GRADED APLUS

FINANCIAL MARKETS AND INSTITUTIONS
COMPREHENSIVE EXAM SCRIPT VERIFIED
QUESTIONS AND SOLUTIONS GRADED
APLUS

●● Who are surplus units in financial markets?
Answer: Participants who receive more money than they spend, such as
investors.


●● Who are deficit units in financial markets?
Answer: Participants who spend more money than they receive, such as
borrowers.


●● What are securities?
Answer: Financial assets that represent a claim on the issuers, including
debt and equity securities.


●● What are debt securities?
Answer: Securities that represent borrowed funds incurred by the issuer.


●● What are equity securities?
Answer: Securities that represent ownership in a firm, commonly known
as stocks.

, ●● What is the role of financial institutions in financial markets?
Answer: To act as intermediaries connecting surplus units with deficit
units.


●● What distinguishes primary markets from secondary markets?
Answer: Primary markets facilitate the issuance of new securities, while
secondary markets facilitate the trading of existing securities.


●● What is liquidity in the context of financial markets?
Answer: The degree to which securities can be easily sold without a loss
of value.


●● What are money market securities?
Answer: Short-term debt securities with a maturity of one year or less.


●● What are capital market securities?
Answer: Long-term securities sold by deficit units to surplus units.


●● What types of securities are included in capital markets?
Answer: Bonds, mortgages, mortgage-backed securities, and stocks.


●● What are derivative securities?