Question

Which of the following statements is FALSE?

Select one:
a. Capital markets are financial markets at which medium- to long-term financial instruments are traded.
b. None
c. A spot market is a financial market in which financial claims previously issued are exchanged.
d. OTC markets are financial markets whereby geographically dispersed traders are linked to one another via telecommunications systems and computers, trade in securities.

Answer 1

B) NONE

REASON :

• Capital markets are venues where savings and investments are channeled between the suppliers who have capital and those who are in need of capital. The entities that have capital include retail and institutional investors while those who seek capital are businesses, governments, and people.Capital markets are composed of primary and secondary markets. The most common capital markets are the stock market and the bond market.Capital markets consist of the primary market, where new securities are issued and sold, and the secondary market, where already-issued securities are traded between investors.The most common capital markets are the stock market and the bond market.
• The spot market is where financial instruments, such as commodities, currencies and securities, are traded for immediate delivery. Delivery is the exchange of cash for the financial instrument. A futures contract, on the other hand, is based on the delivery of the underlying asset at a future date.
• An over-the-counter (OTC) market is a decentralized market in which market participants trade stocks, commodities, currencies or other instruments directly between two parties and without a central exchange or broker. Over-the-counter markets do not have physical locations; instead, trading is conducted electronically. This is very different from an auction market system. In an OTC market, dealers act as market-makers by quoting prices at which they will buy and sell a security, currency, or other financial products. A trade can be executed between two participants in an OTC market without others being aware of the price at which the transaction was completed. In general, OTC markets are typically less transparent than exchanges and are also subject to fewer regulations. Because of this liquidity in the OTC market may come at a premium.