Financial Markets & Institutions

Front

What are the learning outcomes of Chapter 3 on Financial Markets & Institutions?

Back

1. Describe the various types of financial markets (Level 2) 2. Describe the various types of financial institutions (Level 2) 3. Recognise various regulators that govern financial activities (Level 1)

Front

What is the primary function of financial markets?

Back

To facilitate the transfer of funds from surplus units (those with excess funds) to deficit units (those in need of funds), ensuring effective allocation of resources and capital.

Front

What are financial securities?

Back

Financial securities are instruments used in financial markets, including stocks, bonds, currencies, and derivatives.

Front

What are the main types of financial securities?

Back

1. Stocks (Equities) 2. Bonds (Debt) 3. Derivatives 4. Currencies (Forex)

Front

What is the money market?

Back

A financial market where only short-term debt instruments (generally with maturities of less than one year) are traded.

Front

What are some common money market instruments?

Back

1. Treasury Bills (T-Bills) 2. Certificates of Deposit (CDs) 3. Commercial Paper 4. Repurchase Agreements (Repos) 5. Banker's Acceptances (BAs) 6. Treasury Notes 7. Money Market Mutual Funds (MMMFs)

Front

What is the role of commercial banks in the financial system?

Back

Commercial banks accept deposits, offer loans, and facilitate payments on behalf of customers.

Front

What is the difference between common stocks and preferred stocks?

Back

Common stocks represent ownership in a company with voting rights, while preferred stocks provide fixed dividends without voting rights.

Front

What is the capital market?

Back

A financial market where long-term financial securities, such as stocks and bonds, are bought and sold.

Front

What is the primary market?

Back

The market where new securities are issued for the first time, allowing companies or governments to raise capital.