Final answer:
Stocks and bonds are traded on securities exchanges that facilitate transactions between buyers and sellers. Capital markets involve long-term financial assets, while money markets handle shorter-term loans. Financial capital markets connect savers wishing to invest with firms needing funds. Option 1 is correct.
Step-by-step explanation:
Stocks and bonds are traded on organized securities exchanges, which are platforms where buyers and sellers meet to engage in trading activities.
For companies to list their stocks and have them traded on an exchange, they are required to pay a fee. Trading is often conducted on the floor of the stock exchange through a process known as open outcry.
The capital markets serve as a venue where financial assets such as corporate bonds, government bonds, and long-term certificates of deposit are traded, functioning as a network where money is loaned for more than one year. Conversely, the money markets are concerned with short-term loans lasting less than a year.
Financial capital markets play a crucial role in transforming financial flows by bridging the gap between the suppliers of financial capital, such as households wanting to invest their savings, and the demanders of financial capital, like firms seeking funds to grow.
These markets facilitate the exchange of a variety of financial instruments, including stocks, bonds, bank loans, and other financial investments.