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6. Financial instruments

Financial instruments are assets that have a monetary value or record a monetary transaction. To coordinate the exchange of capital between borrowers and lenders, financial instruments trade in the financial markets. These financial instruments can be categorized on the basis of their issuers, maturity, risk, and other factors.

Identify the financial instruments based on the following descriptions.

Description	Financial Instrument
Issued by nonfederal government entities, these financial instruments are debt securities that fund their capital expenditures. They are exempt from most taxes imposed in the area where the securities are issued.
Issued by money-centered financial firms, these short- or medium-term insured debt instruments pay higher interest than a regular savings account. They are low-risk instruments and have low returns.
These financial instruments are investment pools that buy such short-term debt instruments as Treasury bills (T-bills), certificates of deposit (CDs), and commercial paper. They can be easily liquidated.
Issued by corporations, these financial instruments give their holders a class ownership in a company. They are considered the most risky but provide higher expected returns.

Which of the following instruments are traded in the capital markets? Check all that apply.

Treasury bills

Preferred stocks

Long-term bank loans

Eurodollar time deposits

Common stocks

A financial instrument whose value is derived from the value of an underlying asset is called a .

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