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SS3: COMMERCE - 2ND TERM

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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;

  1. The central bank
  2. Development Banks
  3. Building societies
  4. National Provident Fund (NPF)
  5. Insurance companies
  6. The stock exchange

Advantages of Capital Market

Advantages of capital market include;

  1. Provision of long-term loan
  2. Mobilisation of savings
  3. Growth of merchant banks
  4. General running of the economy

Functions of Capital Market

  1. Long-term fund mobilization
  2. Avenue for lending and borrowing
  3. Gives Nigeria opportunity of ownership in foreign business
  4. Chanelling of funds to productive investment
  5. Government can borrow long-term capital

Differences between Money and Capital Market

Money MarketCapital Market
1. Provision of short-term fundsProvision of long-term funds
2. Relatively low returnsRelatively high returns
3. Low riskHigh risk
4. Tenure is about a yearTenure is about 5 to 10 years
5. Instruments traded are treasury bills and certificateInstruments traded are shares, bonds, and debenture.
6. Members are commercial banks and finance companyMembers are stock exchange and investment banks

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