$10.$ Financial instruments

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.

Description

Financial Instrument

Backed by the U$.$S$.$ 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.U$.$S$.$ Treasury notes and bonds $$Issued by corporations, these unsecured debt instruments are used to fund corporate short$-$term financing requirements. If issued by a financially strong company, they have less risk.$$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.$$Issued by corporations, these financial instruments give their holders a class ownership in a company. They are riskier than bonds but less risky than the general class of ownership.$$

Which of the following instruments are traded in the capital markets?$$Check all that apply.

Corporate bonds

Certificates of deposit

Preferred stocks

Common stocks

Long$-$term bank loans

A financial instrument whose value is derived from the value of an underlying asset is called a$.$