Question : What is the primary function of the capital market?
Option 1: Facilitating short-term borrowing and lending
Option 2: Financing long-term investments
Option 3: Trading foreign currencies
Option 4: Facilitating real estate transactions
Correct Answer:
Financing long-term investments
Solution : The correct answer is (b) Financing long-term investments.
The primary function of the capital market is to facilitate the financing of long-term investments. The capital market provides a platform for individuals, businesses, and governments to raise funds for investment purposes. It allows the buying and selling of long-term financial instruments, such as stocks, bonds, and other securities, which are used to channel funds from savers or investors to borrowers or issuers.Through the capital market, companies can raise capital by issuing stocks or bonds to investors. These funds can be used for various long-term investment projects, such as research and development, expansion, infrastructure development, and acquisitions. Governments also utilize the capital market to finance public projects and initiatives.
