Capital market

Definition

A capital market is a financial market where buyers and sellers engage in the trade of long-term debt and equity securities. It serves as a platform for raising capital through stocks, bonds, and other long-term investments.

5 Must Know Facts For Your Next Test

1. Capital markets include both primary and secondary markets.
2. They are essential for economic growth as they provide funds for businesses to expand.
3. The main instruments traded are stocks and bonds.
4. Governments can also raise funds in capital markets by issuing government bonds.
5. Regulation of capital markets is crucial to ensure transparency, fairness, and investor protection.

Review Questions

• What are the main instruments traded in capital markets?
• How do primary and secondary markets differ within the context of capital markets?
• Why is regulation important in capital markets?

Related terms

Primary Market:

A financial market where new securities are issued and sold for the first time.

Secondary Market:

A financial market where previously issued securities are traded among investors.

Debt Securities: Financial instruments representing a loan made by an investor to a borrower, typically involving periodic interest payments.