Capital market

THE CAPITAL MARKET

The capital market is made up of financial institutions which deal in long term financing.

The capital market provides medium and long-term loans for investment. They therefore, bring long-term lenders and borrowers together. Loans given are usually for more than two years.

INSTRUMENTS USED IN CAPITAL MARKET

Instrument used in capital market are mainly stocks and shares.

Stocks and shares are securities purchased by individuals, which is an evidence of contributing part of the total capital used in running an existing industry. At the end of a normal business year, stocks and shareholders receive dividend as a reward for contributing the money in running of the business.

INSTITUTION INVOLVED IN CAPITAL MARKET

1. Insurance companies
2. Issuing houses

• Development banks

1. Investment bank
2. Building societies or mortgage bank

FUNCTIONS OF THE CAPITAL MARKET

1. Provision of long-term capital to investors both in the public and private sectors
2. Provision of long term investment opportunities from which income may be earned
3. Mobilisation of savings for investment
4. Encourage the growth of merchant banking
5. Provision of investment advice
6. Provision of opportunity to the public to participate in running of the economy.

Assignment (Post your answer and question title using the box below for evaluation and discussion)

What are the advantages of Capital Market?