2.4.1 The structure of financial markets and financial assets

• Financial markets provide a mechanism for price discovery
• Match the financial market type with its description:

  Stock Market ↔️ Company shares are traded

  Bond Market ↔️ Debt securities are traded

  Foreign Exchange Market ↔️ Currencies are traded

  Derivatives Market ↔️ Financial contracts are traded
• Financial markets allow savers to lend their funds to borrowers for investment purposes.


  True
• Derivatives enable investors to hedge against risks in financial markets.


  True
• Financial markets contribute to the efficient allocation of capital and risk within the economy
• Financial markets allow investors to hedge against risks through instruments like derivatives.


  True
• The bond market is where debt securities are traded
• What is the purpose of price discovery in financial markets?

  Allocate capital efficiently
• How do financial markets contribute to the efficient allocation of capital?

  Through price discovery
• What is the primary role of financial markets in facilitating the transfer of funds?

  Lending funds to borrowers
• Bonds are debt securities that promise fixed interest payments
• Stocks provide voting rights to shareholders.


  True
• Financial markets facilitate the transfer of funds between savers and borrowers
• The Stock Market is where debt securities like bonds are traded.

  False
• Financial markets facilitate the transfer of funds between savers and borrowers
• Financial markets are platforms where financial assets such as stocks, bonds, and currencies are traded
• Hedging and diversification in financial markets allow the management of financial risks.


  True
• Financial markets play a crucial role in the efficient allocation of capital and risk management
• Financial markets determine asset prices through the interaction of supply and demand
• Match the financial market type with its description:

  Stock Market ↔️ Company shares are traded

  Bond Market ↔️ Debt securities are traded

  Foreign Exchange Market ↔️ Currencies are traded

  Derivatives Market ↔️ Financial contracts are traded
• Financial markets determine asset prices through the interaction of supply and demand
• Match the type of financial market with its description:

  Stock Market ↔️ Trades company shares

  Bond Market ↔️ Trades debt securities

  Foreign Exchange Market ↔️ Trades currencies
• Arrange the main roles of financial markets in the economy:

  1️⃣ Facilitate the transfer of funds

  2️⃣ Provide a mechanism for price discovery

  3️⃣ Allow the management of financial risks
• Financial markets determine asset prices through the interaction of supply and demand.


  True
• The derivatives market trades financial contracts such as futures and options
• The Foreign Exchange Market is where currencies are traded.

  True
• What are money market instruments?

  Short-term debt instruments
• Arrange the main purposes of financial markets:

  1️⃣ Facilitate the transfer of funds

  2️⃣ Provide a mechanism for price discovery

  3️⃣ Allow the management of financial risks
• Match the type of financial market with its description:

  Stock Market ↔️ Company shares are traded

  Bond Market ↔️ Debt securities are traded

  Foreign Exchange Market ↔️ Currencies are traded

  Derivatives Market ↔️ Financial contracts are traded
• What instrument do investors use to hedge against financial risks in financial markets?

  Derivatives
• What is the process by which financial markets determine the prices of financial assets?

  Price discovery
• Match the financial market with its description:

  Bond Market ↔️ Where debt securities are traded

  Foreign Exchange Market ↔️ Where currencies are traded
• Financial markets determine asset prices through the interaction of supply and demand
• Stocks represent ownership in a company and provide rights to dividends and voting.


  True
• Stocks provide voting rights to shareholders.


  True
• Order the following characteristics to differentiate between debt and equity:

  1️⃣ Debt has a creditor claim, while equity has an ownership claim

  2️⃣ Debt has lower risk, while equity has higher risk

  3️⃣ Debt offers fixed interest payments, while equity provides variable dividends

  4️⃣ Debt includes bonds and loans, while equity includes stocks
• What type of risk is associated with bonds due to fixed interest payments?

  Credit risk
• What are the primary purposes of financial markets?

  Fund transfer, price discovery, risk management
• Financial markets facilitate the transfer of funds between savers and borrowers.


  True
• What is the main purpose of financial markets?

  Transfer funds between savers and borrowers