Financial instruments are assets that have a monetary value or record a monetary transaction. To coordinate the exchange of capital between borrowers and lenders, financial instruments trade in the financial markets. These financial instruments can be categorized on the basis of their issuers, maturity, risk, and other factors. Identify the financial instruments based on the following descriptions.

a. Backed by the US government, these financial instruments are fixed-rate debt securities with a maturity of more than one year. They are considered default free but are subject to interest rate risk.
b. Issued by corporations, these unsecured debt instruments are used to fund corporate short-term financing requirements. If issued by a financially strong company, they have less risk.
c. These financial instruments are investment pools that buy such short-term debt instruments as Treasury bills (T-bills), certificates of deposit (CDs), and commercial paper. They can be easily liquidated.
d. These financial instruments are contractual agreements that give one party a long-term agreement to use an asset by providing regular payments.

Which of the following instruments are traded in the capital markets? Check all that apply.
a. Common stocks
b. Corporate bonds
c. Preferred stocks
d. Certificates of deposit
e. Long-term bank loans

a. U.S Treasury bills: Backed by the US government, these financial instruments are fixed-rate debt securities with a maturity of more than one year. They are considered default free but are subject to interest rate risk.

b. Commercial paper: Issued by corporations, these unsecured debt instruments are used to fund corporate short-term financing requirements. If issued by a financially strong company, they have less risk.

c. Money Market Mutual Funds: These financial instruments are investment pools that buy such short-term debt instruments as Treasury bills (T-bills), certificates of deposit (CDs), and commercial paper. They can be easily liquidated.

d. Leases: These financial instruments are contractual agreements that give one party a long-term agreement to use an asset by providing regular payments.

Capital market instruments are the trade in both stocks and bonds, they're long-term assets.

The following instruments are traded in the capital markets;

• Common stocks.

• Corporate bonds.

• Certificates of deposit.