FINANCIAL MARKETS AND INSTITUTIONS ACTUAL TEST PAPER QUESTIONS AND SOLUTIONS GRADED A+

FINANCIAL MARKETS AND INSTITUTIONS
ACTUAL TEST PAPER QUESTIONS AND
SOLUTIONS GRADED A+

◉ 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?