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Functions of Capital Market Institutions - SS2 Economics Past Questions and Answers - page 1

1

What is the primary function of capital market institutions?

A

To provide a platform for buying and selling securities

B

To provide investment advice to investors

C

To manufacture securities

D

To regulate financial markets

correct option: a
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2

What is the role of capital market institutions in managing risk?

A

Providing risk management tools such as derivatives

B

Pricing securities

C

Facilitating capital raising

D

None of the above

correct option: a

(Capital market institutions provide various risk management tools, such as derivatives, that help investors to manage their exposure to different types of risks)

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3

What is the benefit of providing liquidity to investors?

A

Enables investors to buy and sell securities quickly and easily

B

Provides investment advice to investors

C

Facilitates capital raising

D

None of the above

correct option: a

(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)

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4

How do capital market institutions contribute to economic growth and development?

A

By channelling savings from investors into productive investments

B

By providing liquidity to investors

 

C

By regulating financial markets

D

By managing risk for investors

correct option: a

(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)

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5

List three examples of securities that are traded on capital markets.

Stocks, bonds, and derivatives.

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6

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.

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