Final answer:
The statement is false; both stocks and long-term bonds trade on the capital markets, while the money market deals with short-term financial instruments with high liquidity.
Step-by-step explanation:
The statement stocks trade on the capital market and bonds trade on the money market is false. Stocks and long-term bonds both trade in the capital markets, where investments are made for periods longer than one year. On the other hand, the money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. This is where investors may loan money for short periods of less than one year, typically through instruments like Treasury bills and short-term certificates of deposit.
In capital markets, investors can earn a return on their investments by buying shares of stock, through which they gain ownership in a company and can benefit from the company's growth and success. In the case of bonds, the investor is essentially lending money to the entity issuing the bond (which can be a corporation or government) for a defined period of time and interest rate.
Both stocks and bonds come with their own level of risk and potential return. Stocks are generally regarded as higher risk with potentially higher returns compared to bonds. Bonds tend to be less volatile and are seen as a safer investment than stocks, but typically with a lower return.