Question

In: Finance

What is an important economic role of capital markets? Give an example of a capital market...

What is an important economic role of capital markets? Give an example of a capital market instrument and explain how it works. Who are the main participants in the capital market?

Solutions

Expert Solution

Important economic role of capital markets are as follows-

A. Capital market is used as a financial intermediary.

B.Capital market is also vital for inclusive growth in terms of wealth distribution .

C. Capital market can be an efficient place for obtaining of various kinds of funding for various investors and corporates.

D. It is also highly safe for the investors, so it will offer high level of mobilisation of savings and improving the efficiency and volume of investment

E.it helps in attracting foreign direct investments and helps in overall growth of economy

Capital market instrument is equity shares which is issued by various companies in order to to generate funds from the market in exchange of the ownership of the company and it is a highly popular form of capital market instrument which is used as most frequent type of ownership dilution in exchange of capital.

Company those are issuing equity shares generally through capital markets by initial public offer or rights issue and it is attracting various investors by bidding through a structured process and then it is allocated to them

Main participants in the capital markets are companies and insurance fund along with retailers and brokers and depositories and stock exchanges.


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