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Answer 1

1. Answer:-

The main types of instruments traded in capital markets are Debentures, Shares, Government securities, and Bonds. There is a high degree of risk involved in the capital market as it involves long term investment. Capital market is of types: Primary market and secondary market.

2. Answer:-

It acts in linking investors and savers. Facilitates the movement of capital to be used more profitability and productively to boost the national income. Boosts economic growth. Mobilization of savings to finance long term investment.

3. Answer:-

These include commercial banks, savings banks, credit unions, and savings and loan associations. The different types of depository institutions are explained as below: #1 – Commercial Banks – Commercial banks accept deposits from the public and offer security to their customers. Due to commercial banks.

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Answer 2

Answer:

1) Characteristics of The Capital Market

Debt and equities instruments traded in the capital markets are intermediate or longer-term in maturity. The scope of the market is very wide. The supply of the new funds comes from the same sectors although it is funneled within the markets through financial institutions.

2) 1. Savings and Capital Formation: In capital market, various types of securities help to mobilize savings from various sectors of population (Individuals, Corporate, Govt., etc.). The twin features of reasonable return and liquidity in stock exchange are definite incentives to the people to invest in securities. This accelerates the capital formation in the country. 2. Permanent Capital: The existence of a capital market/stock exchange enables companies to raise permanent capital. The investors cannot commit their funds for a permanent period but companies require funds permanently. 3. Industrial Growth: The stock exchange is a central market through which resources are transferred to the industrial sector of the economy. 4. Beady and Continuous Market: The stock exchange provides a central convenient place where buyers and sellers can easily purchase and sell securities. 5. Reliable Guide to Performance: The capital market serves as a reliable guide to the performance and financial position of corporate, and thereby promotes efficiency. 6. Proper Channelization of Funds: The prevailing market price of a security and relative yield are the guiding factors for the people to channelize their funds in a particular company. 7. Provision of Variety of Services: The financial institutions functioning in the capital market provide a variety of services such as grant of long term and medium term loans to entrepreneurs. 8. Development of Backward Areas: Capital Markets provide funds for projects in backward areas. This facilitates economic development of backward areas. 9. Foreign Capital: Capital markets make possible to generate foreign capital. Indian firms are able to generate capital funds from overseas markets by way of bonds and other securities. 10. Easy Liquidity: With the help of secondary market investors can sell off their holdings and convert them into liquid cash.

3)The major categories of financial institutions include central banks, retail and commercial banks, internet banks, credit unions, savings, and loans associations, investment banks, investment companies, brokerage firms, insurance companies, and mortgage companies.

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