manchester88

The prospectus for the Horizon Fund states that it invests only in real assets. Which of the following would the Horizon Fund most likely include in its portfolio?

A) Holdings of foreign currencies.

B) Common stock of a technology company.

C) An investment in an apartment complex.

---

Real assets are assets with a physical presence such as real estate, equipment, and commodities. Financial assets include stocks, bonds, derivatives, and currencies. An investment in an apartment complex is a real estate investment and therefore would be considered a real asset.

manchester88

A securities exchange where traders buy and sell long-term government bonds from and to other traders would best be described as part of the:

A) capital market.

B) primary market.

C) money market.

---

The exchange can be described as part of the secondary capital markets. A security is first issued in the primary market, and then it trades among investors in the secondary market. The money market refers to the market for short-term debt instruments (usually with maturities of less than one year) such as T-bills.

manchester88

The “real assets” classification most likely includes:

A) bonds.

B) stocks.

C) commodities.

---

Real assets include commodities, real estate, durable equipment, and other physical assets. Bonds and stocks are classified as financial assets.

manchester88

Markets for financial assets with maturities of one year or less are best characterized as:

A) primary markets.

B) capital markets.

C) money markets.

---

“Money markets” generally refers to markets for debt securities maturing in one year or less. Capital markets refer to markets for equities and for debt securities with maturities greater than one year. Primary markets are the markets for newly issued securities.

manchester88

The main functions of the financial system most likely include:

A) determining equilibrium interest rates and allocating capital to its most productive uses.

B) determining the supply of money and determining equilibrium interest rates.

C) allocating capital to its most productive uses and determining the supply of money.

---

The main functions of the financial system are to allow individuals and organizations to save, borrow, raise capital, and manage risks; to determine equilibrium rates of return that equate the amounts of lending and borrowing; and to allocate capital to its most productive uses. The money supply is typically controlled by countries’ central banks.