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Which of the following statements concerning cash is true?
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1. Introduction to Accounting
Types of Accounting
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Which one of the following is an example of a borrower in the financial markets?
A
An individual purchasing shares of stock
B
A corporation issuing bonds to raise capital
C
A bank acting as a custodian for client assets
D
A mutual fund investing in government securities
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Understand the concept of a borrower in financial markets: A borrower is an entity that raises funds by issuing financial instruments, such as bonds, to meet its financial needs. This entity is obligated to repay the borrowed funds with interest over time.
Analyze the options provided in the question: Each option represents a different participant or activity in the financial markets. Determine which one involves borrowing funds.
Option 1: 'An individual purchasing shares of stock' - This represents an investor buying equity in a company, not borrowing funds.
Option 2: 'A corporation issuing bonds to raise capital' - This represents a corporation borrowing funds from investors by issuing bonds, which is a clear example of borrowing in financial markets.
Option 3: 'A bank acting as a custodian for client assets' and Option 4: 'A mutual fund investing in government securities' - Both represent entities managing or investing funds, not borrowing. Therefore, the correct answer is Option 2.
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