$5.$ 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.

Issued by major banks, these short$-$term instruments pay higher interest than Treasury securities$,$ but still have low returns. Risk depends on the financial strength of the bank.

These financial instruments are U$.$S$.$ dollar deposits outside the United States that earn interest over a certain time period. Risk associated with these deposits depends on the risk of the issuing bank.

Issued by corporations, these financial instruments give their holders a class ownership in a company. They are considered the most risky but provide higher expected returns.