Determine whether each security listed below would be sold i

Determine whether each security listed below would be sold in a capital market or a money market. (1=Capital Market, 2=Money Market)

________ Commercial paper issued by Ford with 90 days to maturity

________ Corporate bond with 30 years to maturity

________ Shares of Ford stock

________ U.S. Treasury bond with 30 days to maturity

Solution

A capital market is characterized by buying and selling of long term (> 90 days) securities, and a Money market is characterized by buying and selling of short term (<= 90 days) securities. Accordingly,

(A) Commercial paper issued by Ford with 90 days maturity - 2

(B) Corporate bond with 30 years maturity - 1

(C) Shares of Ford stock - 1 (Since shares of a company are long term securities)

(D) US Treasury bond with 30 days maturity - 2