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Describe the different ways in which capital can be transferred from suppliers of capital to those...

Describe the different ways in which capital can be transferred from suppliers of capital to those who are demanding capital.

Indicate whether the following instruments are examples of money market or capital market securities. a. U.S. Treasury bills b. Long-term corporate bonds c. Common stocks d. Preferred stocks e. Dealer commercial paper

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Answer #1

Different ways in which capital can be transferred from supplier of capital to those who are demanding capital are
1. Through purchase of bonds : The suppliers of funds can gain bonds of companies or government for certain yield and provide funds to companies or corporate. This is less risky.
2. Through purchase of equity shares : The suppliers by getting shares or partnership in firm can raise capital .
3. Capital can be transferred through banks: Banks act as intermediaries to transfer funds from suppliers to those who demand capital.

US treasury bills are money market securities
Long- Term corporate bonds are capital market securities
Common Stocks are capital market securities.
Preferred Stock are capital markets securities
Dealer Commercial Paper are money market securities.

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