Functions of Capital Market Institutions - SS2 Economics Past Questions and Answers - page 1
What is the primary function of capital market institutions?
To provide a platform for buying and selling securities
To provide investment advice to investors
To manufacture securities
To regulate financial markets
What is the role of capital market institutions in managing risk?
Providing risk management tools such as derivatives
Pricing securities
Facilitating capital raising
None of the above
(Capital market institutions provide various risk management tools, such as derivatives, that help investors to manage their exposure to different types of risks)
What is the benefit of providing liquidity to investors?
Enables investors to buy and sell securities quickly and easily
Provides investment advice to investors
Facilitates capital raising
None of the above
(Liquidity signifies the ability of investors to buy and sell securities quickly and easily for investment purposes. This is a benefit that can be provided by capital market institutions)
How do capital market institutions contribute to economic growth and development?
By channelling savings from investors into productive investments
By providing liquidity to investors
By regulating financial markets
By managing risk for investors
(Capital market institutions are channelling savings from investors into productive investments. This productive investment can translate into increased productivity and income, which will in turn contribute to economic growth and development)
List three examples of securities that are traded on capital markets.
Stocks, bonds, and derivatives.
What is the role of capital market institutions in pricing securities?
Capital market institutions help to determine the market prices of securities through the forces of supply and demand.