(a) Explain the term capital market.
(b) How is the capital market different from the stock exchange?
(c) What are the advantages of the capital market?
Explanation
(a)The Capital Market is the market for medium term or long term loan. The Capital Market serves the needs of industry and the commercial sector. The Capital Market is made up of the following institutions: Issuing houses, insurance companies, development banks etc. It comprises all the institutions which are concerned with either the supply of or demand for long term capital.
(b) How Capital market is different from the stock exchange as it is a market for long term loan while the stock exchange market is a specialized market for the buying and selling of securities, i.e, claims to loans or shares.
(c) Advantages of the capital market are:
(i) Provision of long term loan to the private and public sector for investments
(ii) Savings are mobilized in the capital market.
(iii) It encourages the growth of merchant banks.
(iv) The general public can also participate in the running of the economy of a country.