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SS1: ECONOMICS - 3RD TERM

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  1. Mining | Week 1
    3 Topics
    |
    1 Quiz
  2. Financial Institution I | Week 2
    7 Topics
    |
    1 Quiz
  3. Financial Institutions II | Week 3
    5 Topics
    |
    1 Quiz
  4. Financial Institutions III | Week 4
    5 Topics
    |
    1 Quiz
  5. Business Organisation | Week 5
    3 Topics
  6. Money | Week 6
    5 Topics
    |
    1 Quiz
  7. Channels of Distribution I | Week 7
    5 Topics
    |
    1 Quiz
  8. Channels of Distribution II | Week 8
    6 Topics
    |
    1 Quiz
  9. Business Finance | Week 9
    7 Topics
    |
    1 Quiz



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The capital market is the market for medium and long-term loans. The capital market serves the needs of the industry and commercial sectors. It also serves as a medium through which government and local authorities borrow funds.

Institutions Involved in the Capital Market:

The capital market is composed of the following institutions:

  • Issuing houses.
  • Insurance companies.
  • Building societies.
  • Investment and unit trusts.
  • Pension funds.
  • Development banks.
  • Stock Exchange.

Instruments used in the Capital Market:

The instruments used in the Capital Market include:

  • Stocks
  • Shares
  • Debentures
  • Bonds

Stocks and shares are financial instruments which serve as securities purchased by individuals, which act as evidence of the contribution of the total capital used in running a company or corporation.

Evaluation Questions:

1. Explain the functions of building society.

2. Write a short note on the following.
i. Merchant bank.
ii. Insurance company.
iii. Commercial bank.

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Evaluation Questions

1. Explain the functions of building society.

Answer:

  1. Accepting deposits from customers.
  2. Giving medium and long term credits to individuals who wish to own houses.
  3. Advising government on housing matters.
  4. They assist the government to carry out its housing programme.

2. Write a short note on the following.

i. Merchant bank.

Answer:

Merchant bank: It is a financial institution that carries out ordinary wholesale banking services with a view to making profit. It undertakes specialized banking services such as acceptance of bills, portfolio management, corporate finance etc.

ii. Insurance company.

Answer:

Insurance Company: Insurance Companies are institutions established with the fundamental objective of providing compensation for the insured against any legal loss arising from the running of the risks insured against. Insurance is based on the principle of indemnity. Insurance companies require the insured to pay premium.

 

iii. Commercial bank.

Answer:

Commercial Bank: It is a financial institution that undertakes all kinds of ordinary retail banking services with the aim of making profit.

It is a financial institution that accepts deposits, and valuables from the public for safekeeping and it creates credit by granting advancing short-term and medium-term loans to all eligible customers.

They operate in the money market.

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