Certified Financial Management Specialist Practice Exam

Money markets are best characterized by what type of securities?

1. Long-term equity investments

2. Short-term debt securities investments

3. Real estate investment funds

4. High-risk speculative assets

The correct answer is: Short-term debt securities investments

Money markets are best characterized by short-term debt securities investments. This market primarily deals with financial instruments that have maturities of one year or less, allowing investors to manage their liquidity needs effectively. The instruments often found in money markets include Treasury bills, commercial paper, and certificates of deposit. These securities are generally considered low-risk, as they are issued by credible organizations or governments, which enhances their safety and reliability as investment vehicles. Long-term equity investments, real estate investment funds, and high-risk speculative assets do not align with the fundamental characteristics of money markets. Long-term equity investments typically involve stocks and ownership stakes in companies, which carry higher risks and longer holding periods. Real estate investment funds relate to physical properties and investments that do not fall within the short-term debt instrument framework. High-risk speculative assets often involve greater volatility and longer-term investments, which contrast sharply with the stability and low-risk nature found in money markets.