WAEC Commerce 2014 Theory question 107

Theory question 107

Stock Exchange

Commerce 2 (essay)
(a) What is a stock exchange market?
(b) Explain six functions of the stock exchange market.

Show the model answer
Model answer

(a) A stock exchange is an organised market where existing and new securities (shares, stocks, bonds) are bought and sold through licensed dealers/brokers.
(b) Any six, explained: provides a market for buying and selling securities (liquidity); helps companies and government raise long-term capital; publishes share prices/information; protects investors through its rules and listing requirements; encourages saving and investment; serves as a barometer of the economy; helps value companies; aids privatisation; attracts foreign investment.

Explanation

Explain each function in a sentence.