Final answer:
Capital markets include long-term securities such as government bonds, and both common and preferred stocks, but do not include commercial paper, which is a short-term security found in money markets.
Step-by-step explanation:
Capital markets are markets for financial assets where money is loaned for more than one year. These markets allow for the trading of various types of securities, such as corporate bonds, government bonds, and stocks, which include both common and preferred stock. The purpose of capital markets is to bridge the gap between suppliers of financial capital, such as households who wish to invest their savings, and demanders of financial capital, such as businesses seeking funds to grow their operations.
Common stock, government bonds, and preferred stock are all securities that are typically traded in capital markets. However, commercial paper is not included because it is a type of short-term debt instrument typically with a maturity of less than one year, and therefore, it is typically traded in the money markets, not the capital markets.