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In which of the following type of markets do the buyers and sellers, mainly individuals and institutions, engage in trade of financial securities such as bonds and stocks?
1. Capital market
2. Money market
3. Domestic market
4. Foreign exchange market

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Correct Answer - Option 1 : Capital market

The Correct Answer is "Capital Market".

Capital market :

  • Capital markets are venues where savings and investments are channeled between the suppliers who have the 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 seek to improve transactional efficiencies.
  • These markets bring those who hold capital and those seeking capital together and provide a place where entities can exchange securities.
  • Capital markets refer to the places where savings and investments are moved between suppliers of capital and those who are in need of capital.

Money market : 

  • The money market refers to trading in very short-term debt investments.
  • At the wholesale level, it involves large-volume trades between institutions and traders.
  • At the retail level, it includes money market mutual funds bought by individual investors and money market accounts opened by bank customers.
  • In all of these cases, the money market is characterized by a high degree of safety and relatively low rates of return.
  • The money market involves the purchase and sale of large volumes of very short-term debt products, such as overnight reserves or commercial paper.
  • An individual may invest in the money market by purchasing a money market mutual fund, buying a Treasury bill, or opening a money market account at a bank.
  • Money market investments are characterized by safety and liquidity, with money market fund shares targeted at $1.

Domestic market :

  • The domestic market, also known as the internal market or home market, is where goods and services are bought and sold within the borders of a country.
  • It is a much smaller market than the international, external, foreign, or global markets.
  • There is considerably less competition in the UK’s domestic market, for example than in the European or global markets.

 

Foreign exchange market :

  • The foreign exchange market is also known as forex, FX, or the currencies market.
  • It is an over-the-counter (OTC) global marketplace that determines the exchange rate for currencies around the world.
  • Participants in these markets can buy, sell, exchange, and speculate on the relative exchange rates of various currency pairs.
  • Foreign exchange markets are made up of banks, forex dealers, commercial companies, central banks, investment management firms, hedge funds, retail forex dealers, and investors.
  • The foreign exchange market is an over-the-counter (OTC) marketplace that determines the exchange rate for global currencies.
  • It is, by far, the largest financial market in the world and is comprised of a global network of financial centers that transact 24 hours a day, closing only on the weekends.

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