1. What is the capital market?

• Answer: The capital market is a financial market where long-term debt or equity securities are bought and sold. It consists of both primary markets (where new securities are issued) and secondary markets (where existing securities are traded).

2. What are primary and secondary markets?

• Answer: The primary market is where new securities are issued and sold for the first time, typically through initial public offerings (IPOs). The secondary market is where existing securities are bought and sold among investors.

3. What is the role of a stock exchange in the capital market?

• Answer: Stock exchanges provide a platform for buyers and sellers to trade securities. They facilitate price discovery, liquidity, and transparency in the market.

4. How do stocks and bonds differ?

• Answer: Stocks represent ownership in a company, entitling the shareholder to a portion of its profits and voting rights. Bonds, on the other hand, are debt securities that represent a loan to the issuer, who agrees to pay periodic interest and return the principal at maturity.

5. What is market capitalization?

• Answer: Market capitalization (market cap) is the total value of a company's outstanding shares of stock. It is calculated by multiplying the current stock price by the total number of outstanding shares.

6. What is the significance of risk and return in the capital market?

• Answer: The capital market involves a trade-off between risk and return. Generally, higher potential returns are associated with higher levels of risk. Investors assess their risk tolerance and investment goals to make informed decisions.

7. How does the central bank influence the capital market?

• Answer: Central banks influence the capital market through monetary policy. By adjusting interest rates and implementing other monetary tools, central banks aim to control inflation, stimulate economic growth, and maintain financial stability.

8. What is a dividend?

• Answer: A dividend is a portion of a company's profits that is distributed to its shareholders. It is usually paid in cash and represents a return on the shareholder's investment.

9. What is the role of regulatory bodies in the capital market?

• Answer: Regulatory bodies, such as the Securities and Exchange Commission (SEC) in the United States, oversee and regulate the capital market. They establish rules and regulations to protect investors, ensure fair and transparent trading practices, and maintain market integrity.

10. How does globalization impact the capital market?

• Answer: Globalization has increased interconnectivity in the capital market. Investors can access a broader range of investment opportunities, but it also exposes the market to global economic events and fluctuations in various regions.