THE CAPITAL MARKET.
Subject:
ECONOMICS
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Term:
FIRST TERM
Week:
WEEK 10
Class:
SS 3
Topic:
THE CAPITAL MARKET.
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Previous lesson:
The pupils have previous knowledge of
MONEY MARKET
that was taught as a topic in the previous lesson
Behavioural objectives:
At the end of the lesson, the learners will be able to
- EXPLAIN CAPITAL MARKET
- LIST TOOLS THAT ARE USED IN THE CAPITAL MARKET
- MENTION THE FINANCIAL INSTITUTIONS THAT ARE INVOLVED IN THE CAPITAL MARKET
Instructional Materials:
- Wall charts
- Pictures
- Related Online Video
- Flash Cards
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Methods of Teaching:
- Class Discussion
- Group Discussion
- Asking Questions
- Explanation
- Role Modelling
- Role Delegation
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Reference Materials:
- Scheme of Work
- Online Information
- Textbooks
- Workbooks
Content:
THE CAPITAL MARKET.
The capital market is made up of financial institutions which deal in long-term financing. The functions of these financial institutions include the collection, pooling, and distribution of funds in such capital from the public. Both government and private sector companies can raise funds from the capital market.
The capital market provides medium and long-term loans for investment. They therefore bring long-term lenders and borrowers together. Loans given are usually for more than two years.
The Nigeria capital market is a key component of the country’s financial system and plays an important role in providing financing to businesses. It is made up of several institutions such as stock exchanges, investment banks, mutual funds, pension funds, insurance companies, hedge funds, and other financial service providers.
EVALUATION:
- Define capital market and discuss its key functions.
- What instruments are traded on the floor of the Nigeria capital market?
INSTRUMENTS USED IN CAPITAL MARKET.
Instruments used in capital markets are mainly stocks and shares.
Stocks refer to ownership of companies. Shares represent a percentage ownership, and are traded on stock exchanges.
Other instruments used in capital markets include bonds, derivatives, commodities, money market securities, and real estate investments. These instruments can be traded on specialized trading platforms such as the Nigeria Stock Exchange or through private brokerages.
Stocks and shares are securities purchased by individuals, which is evidence of contributing part of the total capital used in running an existing industry. At the end of a normal business year, stocks and shareholders receive a dividend as a reward for contributing the money in running of the business. In the Nigeria capital market, stocks and shares can be sold publicly or privately. They can also be traded at different prices depending on their liquidity and how well they perform in the stock exchange.
There are many risks associated with investing in the capital market, including market volatility, regulatory changes, interest rate fluctuations, political instability, credit risk, accounting irregularities, and economic downturns. Investors should carefully research the market and their investment strategies before making any investments to mitigate these risks.
Despite the risks involved, many investors find investing in the capital market to be a very rewarding experience. With careful planning and understanding of the markets, individuals can reap significant financial rewards from investing in stocks and other securities.
INSTITUTIONS INVOLVED IN CAPITAL MARKET
.
There are several financial institutions and organizations involved in the capital market, including stock exchanges, investment banks, mutual funds, pension funds, insurance companies, hedge funds, and other financial service providers. These organizations serve as intermediaries between issuers of securities and investors who purchase them. They help facilitate the buying and selling of stocks, bonds, derivatives, and other financial instruments.
One of the main institutions in the capital market is the Nigeria Stock Exchange (NSE). The NSE is the largest and oldest securities exchange in Nigeria, with more than 800 listed companies and over 175 million outstanding shares. It offers an effective trading platform where investors can gain access to a variety of stocks and other securities.
Another important institution in the capital market is investment banks, which provide financial services such as underwriting, lending, issuing securities, and trading on the stock market. They often work closely with mutual funds to give investors access to a wide range of financial products and services.
OTHER PLAYERS IN THE NIGERIA CAPITAL MARKETS ARE
- Insurance companies
- Issuing houses
- Development banks
- Investment bank
- Building societies or mortgage bank
EVALUATION
1. What is a stock exchange, and what are the main functions of these institutions?
2. How do investment banks help facilitate capital market transactions, and what services do they offer to investors?
3. What role do mutual funds play in the capital market, and how do they help connect investors with financial products and services?
4. What are some of the different types of institutions involved in the capital market, and how do they work together to facilitate the buying and selling of financial instruments?
5. How do regulatory changes, interest rate fluctuations, and other economic factors impact the capital market, and what strategies can investors use to mitigate these risks?
Answers:
1. A stock exchange is a financial institution that acts as a marketplace for investors to buy and sell securities, such as stocks and bonds. The main functions of these institutions include listing securities, facilitating trading and price discovery, providing market information, and ensuring regulatory compliance.
2. Investment banks act as intermediaries in the capital market by providing a range of financial services such as underwriting, issuing securities, lending, and trading on the stock market. They work closely with mutual funds and other financial institutions to connect investors with a wide range of investment opportunities.
3. Mutual funds are investment vehicles that pool the money of many investors to purchase a variety of securities, such as stocks and bonds. They play an important role in the capital market by helping connect investors with a broad range of financial products and services.
4. Other institutions involved in the capital market include insurance companies, issuing houses, development banks, investment banks, building societies or mortgage banks, and regulatory bodies. These institutions work together to facilitate the buying and selling of financial instruments, monitor market trends and risks, and provide a variety of services to investors.
5. Economic factors such as interest rate fluctuations and regulatory changes can impact the performance of the capital market by affecting the demand for different types of securities and financial products. Investors can mitigate these risks by carefully managing their portfolios, diversifying their investments across different asset classes and geographies, and staying informed about market developments.
FUNCTIONS OF THE CAPITAL MARKET
- Provision of long-term capital to investors both in the public and private sectors
- Facilitation of the movement of funds from surplus to deficit units
- Allocation of resources among competing uses and users.
- Regulation of share issue and market
- Asset management and portfolio diversification
- Settlement of transactions in the capital market and other related services.
- Provision of long-term investment opportunities from which income may be earned
- Mobilization of savings for investment
- Encourage the growth of merchant banking
- Provision of investment advice
- Provision of opportunity to the public to participate in running the economy.
EVALUTION
1. What is the role of capital markets in allocating resources and facilitating the movement of funds between surplus and deficit units?
2. How do investment banks and other financial institutions help to meet the long-term investment needs of businesses and investors?
3. What are some of the different types of assets that are typically traded on capital markets, and how do investors evaluate their relative risks and returns?
4. How do regulatory changes and other economic factors impact the performance of capital markets, and what strategies can investors use to mitigate these risks?
5. How do developments in technology and other innovations affect the functioning of capital markets, and how do investors take advantage of these trends to optimize their returns?
ANSWERS:
1. The functions of the capital market include allocating resources and facilitating the movement of funds between surplus and deficit units, as well as managing assets and providing investment advice to investors.
2. Investment banks and other financial institutions play an important role in the capital market by connecting investors with a wide range of investment opportunities, as well as monitoring market trends and risks and providing a variety of services to support these investments.
3. The assets that are typically traded on capital markets include stocks, bonds, derivatives, mutual funds, real estate, and other financial instruments. Investors use a variety of tools and techniques to evaluate these assets based on their risk-return profiles, market conditions, and other factors.
4. Economic factors such as interest rate fluctuations or regulatory changes can impact the performance of capital markets by affecting investor demand for different types of securities or financial products. Investors can manage these risks by diversifying their portfolios across different asset classes and geographies, and staying informed about market developments.
5. Technological innovations such as automation, artificial intelligence, big data analytics, and blockchain are transforming the way capital markets function, impacting the structure of financial institutions and investment strategies used by investors. Additionally, regulatory reforms that promote transparency and efficiency in capital markets can also impact the performance of these markets over time.
PRESENTATION
Step 1:
The class teacher revises the previous topics
Step 2.
He introduces the new topic
Step 3:
The class teacher allows the pupils to give their own examples and he corrects them when the needs arise
Conclusion
The class teacher wraps up or concludes the lesson by giving out short notes to summarize the topic that he or she has just taught.
The class teacher also goes round to make sure that the notes are well copied or well written by the pupils.
He or she makes the necessary corrections when and where the needs arise.
.