Professional Documents
Culture Documents
Financial Markets
Financial Markets
Financial Markets
This course is a primer on financial markets and products. Upon completing this course, you will learn about:
As is the case for most financial markets, the money markets are primarily institutional in nature – they are
used by large financial institutions and by corporates. Transaction sizes are frequently in the amount of $100 million
or more, with minimum amounts of $1 million.
For investors, the primary purpose of the money markets is to provide for liquid investments that can be
used to invest short-term funds. For issuers such as banks, finance companies, and large corporations, money
markets provide a source of low-cost funds that are constantly rolled over. This means that new securities are issued
as old securities mature, in order to become a permanent part of their funding.
The securities that are traded on the money-market fall into two main categories, and these are explored on
the next page...
This is a primary market transaction as the shares are newly issued and the proceeds go to the issuer.
Examination – Page 1 of 4
1. An individual has purchased 1,000 shares of the newly issued common stock of XYZ company, with XYZ
corporation receiving the proceeds of the sale. Is the transaction:
a) A primary market transaction
b) A secondary market transaction
c) Could be either of the above
2. The bank/dealer market in foreign exchange is an example of which type of market?
a) A physical marketplace
b) An exchange
c) An OTC Market
3. The major provider of investment funds to the capital markets are:
a) Banks
b) Brokers
c) Central Banks
d) Individuals
4. The regulation of domestic financial markets is exclusively a responsibility of the country's central bank.
a) True
b) False
5. Which of the following statements is false?
a) Money Market
b) Bond Market
c) Equity Market
d) Derivatives Market
7. Corporations with weak credit ratings can borrow money by issuing which of the following securities?
a) Commercial Paper
b) Certificates of Deposit
c) Fed Funds
d) Repurchase Agreements
a) An option
b) A futures contract
c) A swap
A futures contract is essentially the exchange-traded equivalent of a forward contract, which is an OTC product. An
option is very different from a forward in that the former is the right to buy or sell, while the latter is the obligation to
buy or sell. A swap has multiple settlements whereas a forward has a single settlement.
10. Which of the following products requires the buyer to pay a premium?
a) A forward contract
b) A futures contract
c) An option
d) A swap