Association of Chartered Certified Accountants (ACCA) Certification Practice Test

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What are capital markets primarily used for?

Trading intangible assets
Trading long-term financial instruments
Exchanging short-term commodities
Buying and selling real estate

The correct answer is: Trading long-term financial instruments

Capital markets are primarily used for trading long-term financial instruments, such as stocks and bonds. These markets facilitate the flow of capital by allowing businesses, governments, and other entities to raise funds for long-term investments through the issuance of securities. When investors purchase these long-term instruments, they provide the capital required for entities to finance operations, expansion, or infrastructure projects. Unlike short-term financial markets, which focus on instruments with shorter maturities such as Treasury bills or commercial paper, capital markets are essential for fostering economic growth by enabling longer-term investments. This distinction helps clarify the roles that various types of financial markets play in the economy.