Question

Financial markets across economies involve various kinds of participants and trade various types of assets and securities. It is important to understand the kinds of markets in which financial transactions take place.

Helen buys 1,000 shares of Microsoft stock through her online brokerage account. In which market is this transaction traded?
a) Financial Asset Markets
b) Physical asset markets
c) Money markets
d) Derivatives markets

Answer 1

Helen's purchase of Microsoft stock is a transaction in the financial asset markets, specifically the secondary market, which is a component of the broader financial capital markets where investors and corporations meet to conduct trades.

Step-by-step explanation:

When Helen buys 1,000 shares of Microsoft stock through her online brokerage account, this transaction is traded in the financial asset markets. More specifically, because she is buying existing shares and not new shares being issued by the corporation, this transaction takes place in the secondary market. Financial asset markets are an integral part of the financial capital markets, where firms raise financial capital and households seek investments that provide a desirable combination of rate of return, risk, and liquidity. These markets are designed to bring together the suppliers of financial capital, like households who have savings they wish to invest, with demanders of financial capital, such as businesses looking for funds to grow.