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Meaning of Capital Market
Capital market is a financial market where medium and long-term funds for industrial development are mobilized and traded. The traders are the securities exchange, Brokers, Jobber (dealers), Issuing Houses, Registrars, and Investment Advisors.
Institutions involved in Capital Market
The institutions involved in capital market are;
- The central bank
- Development Banks
- Building societies
- National Provident Fund (NPF)
- Insurance companies
- The stock exchange
Advantages of Capital Market
Advantages of capital market include;
- Provision of long-term loan
- Mobilisation of savings
- Growth of merchant banks
- General running of the economy
Functions of Capital Market
- Long-term fund mobilization
- Avenue for lending and borrowing
- Gives Nigeria opportunity of ownership in foreign business
- Chanelling of funds to productive investment
- Government can borrow long-term capital
Differences between Money and Capital Market
Money Market | Capital Market |
1. Provision of short-term funds | Provision of long-term funds |
2. Relatively low returns | Relatively high returns |
3. Low risk | High risk |
4. Tenure is about a year | Tenure is about 5 to 10 years |
5. Instruments traded are treasury bills and certificate | Instruments traded are shares, bonds, and debenture. |
6. Members are commercial banks and finance company | Members are stock exchange and investment banks |
Responses