(a) What is a capital market? [5 marks]
(b) Describe any three instruments used in the capital market. [15 marks]
Explanation
(a) The capital market is a financial market In which funds for medium and long term Investments are borrowed or lent.
(b)(i) Shares. These are financial Instruments utilized in the capital market for long term investments. A share is the portion of a limited liability company owned by an investor
(ii) Bonds. This is a long term financial security used to source for funds Bonds may be issued by firms, financial institutions or governments. Bonds issued by the government are generally regarded as very safe.
(iii) Treasury certificates: These are government financial securities which mature after a year. They are issued by the government through the central bank to either borrow or lend money in the capital market.
(iv) Debentures: These are secured loans raised by a company usually With fixed interests and some times fixed redemption dates.