Final answer:
Asset-backed securities (C) are the investments traded based on their average life rather than their stated maturity dates. Government and corporate bonds are usually traded based on their maturity dates. The average life of asset-backed securities reflects the cash flow from the underlying assets rather than a flat maturity date.
Step-by-step explanation:
The investments that are generally traded according to their average life rather than their stated maturity dates are asset-backed securities (C). Asset-backed securities are structured to pay based on the cash flows from the underlying assets, and these cash flows determine their average life. In contrast, government bonds (B) and corporate bonds (A) are usually traded based on their stated maturity dates. Fixed-rate capital securities (D) generally have a specified maturity date like corporate bonds.
Government bonds are considered low-risk and provide a stream of payments, much like a bank loan is an asset to a bank. They are often issued with a low rate of interest by the government, which is almost certain to pay off the bond. Corporate bonds issued by firms pay a higher interest rate due to the increased risk compared to government bonds. However, both types of bonds are traded on their maturity dates, not on the average life of the security.
Money markets and capital markets are where these securities are traded, and they offer different loan terms, with capital markets facilitating loans for more than one year. The interest rate fluctuations affect the value of bonds, but far less than stocks which can have significant annual value changes.