Understanding Capital Markets

What is the capital market?

• The capital market is a financial market for buying and selling long-term securities.

• A venue for buying and selling commodities.

• A platform for real estate transactions.

• A market for trading short-term loans.

Name one type of security traded in the capital market.

• Stock

• Bond

• Mutual Fund

• Real Estate

What is the primary purpose of the capital market?

• To facilitate the raising of capital.

• To manage government debt.

• To provide insurance for investments.

• To regulate interest rates.

How do investors benefit from the capital market?

• Investors lose money in capital markets due to high fees.

• Investors benefit from capital markets by accessing investment opportunities, raising capital, and earning returns.

• Capital markets only benefit large corporations, not individual investors.

• Investors are restricted from accessing any investment opportunities.

What is a stock?

• A stock is a form of currency.

• A stock is a share in the ownership of a company.

• A stock is a type of bond.

• A stock is a government-issued certificate.

What is a bond?

• A bond is a savings account that earns interest over time.

• A bond is a financial instrument used for trading commodities.

• A bond is a debt security that represents a loan from an investor to a borrower.

• A bond is a type of stock that represents ownership in a company.

What is the difference between stocks and bonds?

• Stocks pay fixed interest rates like bonds.

• Stocks represent ownership in a company, while bonds represent a loan to an entity.

• Bonds are shares in a company.

• Stocks are safer investments than bonds.

What does it mean to buy shares in a company?

• To buy shares in a company means to purchase ownership in that company.

• To buy shares means to receive dividends without ownership.

• To buy shares means to lend money to the company.

• To buy shares is to purchase a product from the company.

How can securities be sold in the capital market?

• Securities can only be sold through government auctions.

• Securities are exclusively sold via bank loans.

• Securities can be sold through IPOs, secondary offerings, and private placements in stock exchanges or over-the-counter markets.

• Securities can be sold only during financial crises.

What role do brokers play in the capital market?

• Brokers manage companies' financial assets directly.

• Brokers only provide investment advice to clients.

• Brokers are responsible for setting market prices.

• Brokers facilitate transactions between buyers and sellers in the capital market.