What is a capital market instrument?  A. Physical asset  B. Financial instrument  C. Intellectual property  D. Raw material

Understanding Capital Market Instruments

A capital market instrument refers to a financial tool used by entities (governments, municipalities, and corporations) to raise money. It is primarily utilized for borrowing in the long term, typically with maturities of more than one year. Capital market instruments include stocks, bonds, and other securities.

Options Analysis

1. Physical asset - This refers to tangible items such as machinery or real estate, which do not fall under the definition of capital market instruments.
2. Financial instrument - This term encompasses a broad range of investment vehicles, including those traded in the capital markets. This is the correct category for capital market instruments.
3. Intellectual property - This refers to creations of the mind, such as patents and copyrights, which are not classified as capital market instruments.
4. Raw material - These are basic materials used in production processes, which do not constitute capital market instruments.

Final Answer

B. Financial instrument is the correct answer, as capital market instruments are indeed classified under financial instruments used for raising capital long term.