3. 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. Financial Instrument Description 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 Issued by corporations, se 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 fund their long-term financing requirements and have less risk than equity securities Which of the following instruments are traded in the capital markets? Check all that apply. Long-term bank loans Preferred stocks Corporate bonds Commercial paper Certificates of deposit A financial instrument whose value is derived from the value of an underlying asset is called a