Certified Financial Management Specialist Practice Exam

What are capital markets primarily used for?

1. Buying and selling real estate

2. Buying and selling securities

3. Buying and selling cryptocurrencies

4. Buying and selling commodities

The correct answer is: Buying and selling securities

Capital markets are primarily used for buying and selling securities, including stocks and bonds. These markets provide a platform for companies and governments to raise funds by issuing shares or debt instruments to investors. The ability to trade in these securities allows investors to buy into ownership stakes in companies or lend money to governments in exchange for interest, with the expectation of future returns. The functioning of capital markets is crucial for the overall economy, as they facilitate the effective allocation of resources and risk. Investors can gain liquidity through these markets, enabling them to invest their capital in various opportunities while at the same time providing businesses and governments access to the financial resources they need to grow and develop. In contrast, other options such as real estate, cryptocurrencies, and commodities pertain to distinct markets. Real estate transactions occur in property markets, while cryptocurrencies trade in digital asset markets, and commodities are managed within commodity markets. Each of these has its unique characteristics, regulations, and investment strategies, separate from the primary functions of capital markets.