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_________ is market where foreign currencies are bought and sold.

_________ is market where foreign currencies are bought and sold.

Looking for the answer to the question below related to Ratio Analysis ?

_________ is market where foreign currencies are bought and sold.

 Options:

A. Stock Market
B. Forex Market
C. Capital Market
D. Debt Market

The Correct Answer Is:

  • C. Capital Market

The correct answer is not C. Capital Market. The correct answer is B. Forex Market. The Forex (foreign exchange) market is where foreign currencies are bought and sold. Let’s provide a detailed explanation of why the correct answer is B, the Forex Market, and why the other options are not correct:

Correct Answer (B. Forex Market):

The Forex Market, also known as the foreign exchange market, is the global marketplace for trading and exchanging currencies. It is the largest and most liquid financial market in the world, where participants buy and sell currencies from different countries.

The primary purpose of the Forex Market is to facilitate international trade and investment by allowing individuals, businesses, financial institutions, and governments to exchange one currency for another. This market operates 24 hours a day, five days a week, to accommodate the global nature of currency trading.

In the Forex Market, currency pairs are traded. Each currency pair consists of two currencies, with one being the base currency and the other the quote currency. When you buy a currency pair, you are essentially buying the base currency and selling the quote currency. The exchange rate between these two currencies determines the value of the trade.

For example, in the EUR/USD currency pair, buying the pair means purchasing Euros (EUR) while simultaneously selling an equivalent amount of US Dollars (USD). This market is essential for international trade, investment, and the determination of exchange rates.

Now, let’s explain why the other options are not correct:

A. Stock Market:

The stock market is a financial market where individuals and institutions buy and sell ownership shares (equity) in publicly traded companies. It does not deal with foreign currencies but rather the buying and selling of stocks and shares in corporations.

The stock market provides a platform for companies to raise capital by selling ownership stakes to investors, and it is a distinct market from the Forex Market, which deals exclusively with currencies.

C. Capital Market:

The capital market is a broader financial market that encompasses various types of securities and financial instruments, including stocks, bonds, and other long-term investment vehicles. While the capital market plays a significant role in facilitating long-term investments and capital formation, it is not specifically focused on the buying and selling of foreign currencies.

The capital market is concerned with raising long-term capital for businesses and governments, as well as trading various financial assets. It is not the market where foreign currencies are primarily bought and sold.

D. Debt Market:

The debt market, also known as the bond market, is a segment of the capital market where debt securities like bonds are bought and sold. Debt instruments represent loans made by investors to corporations, governments, or other entities. Participants in the debt market receive periodic interest payments and the return of the principal amount at the end of the bond’s term.

Similar to the stock market and capital market, the debt market does not deal with foreign currencies directly. Its primary focus is on the issuance, trading, and investment in debt securities rather than the exchange of currencies.

In summary, the correct answer is B. Forex Market because it is specifically the market where foreign currencies are bought and sold. The other options, A (Stock Market), C (Capital Market), and D (Debt Market), have different purposes and deal with various financial instruments but are not primarily focused on foreign currency exchange, which is the central function of the Forex Market.

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