Question

Which investment length would you classify AFS securities if the securities will not be sold within a year?

1) Short-term
2) Medium-term
3) Long-term
4) Cannot be determined

Answer 1

AFS securities not sold within a year would be classified as long-term investments in the capital market, which is where loans extend beyond one year.

Step-by-step explanation:

AFS securities, or Available-For-Sale securities, which are not intended to be sold within a year, would be classified in the capital market. When considering the length of investment, the capital markets pertain to financial assets or loans that extend beyond one year.

Since AFS securities in this context will not be sold within a year, they align more with the notion of capital market investments, framing them as long-term investments. This classification is based on the general rule that capital markets are where money is loaned for more than one year, covering instruments such as corporate bonds, government bonds, and long-term certificates of deposit.