Final answer:
In the capital markets, preferred and common stocks are traded, alongside longer-term certificates of deposit. Commercial paper and Treasury bills are traded in the money markets.
Step-by-step explanation:
The instruments traded in the capital markets are meant for long-term financing and investments, generally for periods exceeding one year. In contrast, the money markets deal with short-term debt instruments, typically for investments of less than one year. Based on this differentiation:
- Commercial paper and Treasury bills are short-term instruments and are thus traded in the money markets.
- Preferred stocks, common stocks, and certificates of deposit (CDs) can be part of the capital markets if their maturity exceeds one year. Small CDs may be traded in the money market if they are for a term of less than a year, while larger or longer-term CDs are traded in capital markets.
Therefore, of the options provided, preferred stocks and common stocks are traded in the capital markets, while commercial paper and treasury bills are traded in the money markets. Certificates of deposit can be traded in either market depending on their maturity.