Financial markets across economies involve various kinds of participants and tra

Question

Financial markets across economies involve various kinds of participants and trade various types of assets and securities. It is important to understand the kinds of markets in which financial transactions take place. You are preparing to take an exam in your finance class, and you've been making flash cards on different markets and transactions. Indicate the markets in which each of the following transactions will be traded: Description of Transaction Type of Market You go to an auto dealer and buy a new car. You drive the car home immediately after making the payment. Financial asset markets Physical asset markets

Explanation / Answer

1) The correct option is Physical Asset Market

Reason -- The Financial Asset is a non-physical asset whose value is derived from a contractual claim, such as bank deposit, bonds and stock. Hence buy a car from dealer in cash is a type of transcation in Physical Asset Market

2) The correct option is Spot Market

Spot Market is the market where financial instruments, such as securities, currenty and commodities are traded immediate delivery.

Future Market is the market in which participants buy and sell commodity and futures contracts for delivery on a specified future date.

Hence, sending $200 at spot rate is the type of transaction of Spot Market

3) The correct option is Money market

Money Market is where finacial instruments with high liquidity and very short maturities are traded. Hence the short term US treasury bill is considered short term maturity security and this type of transation happen in Money Market

4) The correct option is Public Market

Bonds are issued to the public in public market.

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