Lesson Notes By Weeks and Term - Senior Secondary 2

Money and capital market institutions

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Term: 3rd Term

Week: 5

Class: Senior Secondary School 2

Age: 16 years

Duration: 40 minutes of 2 periods each

Date:       

Subject:      Economics

Topic:-       Money and capital market institutions

SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to

  1. Define money market

 

  1. Identify the financial institutions that operate in the money market

 

  1. identify the instruments used in the money markets

 

  1. List the advantages of money markets

 

  1. Define capital market

 

  1. Identify the financial institutions that operate in the capital market

 

  1. identify the instruments used in the capital markets

 

  1. List the advantages of capital markets

 

  1. Define primary market

 

  1. Define secondary market

 

  1. Explain the stock exchange market

 

  1. Identify the roles of the jobbers and the brokers

INSTRUCTIONAL TECHNIQUES: Identification, explanation, questions and answers, demonstration, videos from source

INSTRUCTIONAL MATERIALS: Videos, loud speaker, textbook, pictures

INSTRUCTIONAL PROCEDURES

PERIOD 1-2

PRESENTATION

TEACHER’S ACTIVITY

STUDENT’S ACTIVITY

STEP 1

INTRODUCTION

The teacher reviews the previous lesson on financial institutions

Students pay attention

STEP 2

EXPLANATION

She defines money market. She identifies the financial institutions that operate in the money market. She identifies the instruments used in the money markets. She Lists the advantages of money markets. She defines capital market and Identifies the financial institutions that operate in the capital market.

 

 

Students pay attention and participates

STEP 3

DEMONSTRATION

She identifies the instruments used in the capital markets. She lists the advantages of capital markets. She defines primary market and secondary market. She explain the stock exchange market and identifies the roles of the jobbers and the brokers

 

 

Students pay attention and participate

STEP 4

NOTE TAKING

The teacher writes a summarized note on the board

The students copy the note in their books

 

NOTE

MONEY AND CAPITAL MARKET INSTITUTIONS

Financial markets can be classified into two broad categories- Money markets and the capital markets

 

THE MONEY MARKETS

The money market is a financial market made up of institutions which provide short term finance or loans for investment. They bring short term borrowers and lenders together. They provide loans to the borrowers for periods, from a few months to two years. The financial institutions that operate in the money market are;

  1. Commercial banks or joint stock banks
  2. Merchant banks or Acceptance houses
  3. Hire purchase companies
  4. Finance companies
  5. The central bank
  6. Discount houses

 

INSTRUMENTS USED IN THE MONEY MARKETS

 

  1. Treasury bills: The central bank issues treasury bills to assist the government to borrow money from the money market on short term basis

 

  1. Bill of exchange: It refers to a promissory note which shows the acknowledgment of indebtedness by a debtor to his creditor and his intention to pay the debts on demands or at any agreed time in future, usually 90 days.

 

  1. Call money funds: It is a special arrangement in which the participating institutions invest surplus money for their immediate requirement on an overnight basis with the interest and withdrawal on demand. It has the advantage of early returns and are withdrawable on demand.

 

ADVANTAGES OF MONEY MARKETS

 

  1. Promotion of economic development
  2. It enhances savings
  3. Invested funds can be recalled Creation of extra income
  4. Provision of finance

 

THE CAPITAL MARKETS

 

The capital market is made up of financial institutions which deal in long term financing. The capital market provides medium and long term loans for investment. Loans given are usually for more than two years. Institutions that operate in capital markets include:

  1. Insurance companies
  2. Issuing houses
  3. Development banks
  4. Investment banks
  5. Mortgage bank
  6. Savings bank
  7. The Stock exchange

 

INSTRUMENTS USED IN THE CAPITAL MARKETS

Stocks and shares are the major instruments used in the capital markets. Stocks and shares are the securities purchased by individuals which are evidence of contributing part of the total capital used in running an existing business. The stock and share holders receive dividend as a reward for contributing the money used in running the business.

ADVANTAGES OF CAPITAL MARKETS 

  1. Provision of long term loans Mobilization of savings
  2. Growth of merchant banks
  3. General running of the economy

Furthermore, the capital markets can be divided into- The primary markets and the secondary markets

 

The Primary Markets: It deals with the buying and selling of new securities. It is dominated by the merchant banks. This is a market where securities are sold for the first time. It is also called New Issue Market.

 

The Secondary Market: It is the market that deals with the buying and selling of old (secondhand) securities. It is dominated by the stock exchange.

 

NOTE: That the financial instruments used in the money market are Treasury bills, Treasury certificates, Bill of exchange, Money at call, etc while the capital market uses Stocks, Shares, Company bonds, and Government bonds.

 

TYPES AND FEATURES OF SECURITIES

Securities are financial instruments which are traded on the stock exchange market.

Financial securities are: shares, debentures, bonds and stocks.

TYPES OF SECURITIES

  1. Debentures: Theses are loans for long term nature. Debenture is a document which acknowledges the indebtedness of a company. It has a fixed rate of interest.
  2. Shares: These are the unit of the capital of a company allocated to individuals. They are issued by quoted companies and traded on the stock exchange market. It can be grouped into ordinary shares and preference shares.
  3. Stocks: These are collection of shares into a bundle or consolidated shares. Stocks are usually quoted per ₦100 nominal value but fractions may be bought or sold.
  4. Bonds: These are securities issued by the government as a means of raising funds. At the redemption, the issuer pays the nominal value of the bond to the holder.

THE STOCK EXCHANGE MARKETS

The stock exchange market is a highly organized capital market which provides facilities for the buying and selling of securities such as shares, stocks, debentures, and government bonds. This market is principally concerned with the creation of market for secondhand securities. The Nigeria Stock Exchange which was incorporated in 1960 is a good example of the stock exchange market. The principal dealers in the stock exchange are the Brokers and the Jobbers. 

JOBBERS are the main dealers in stocks and shares and other forms of securities. They transact business with brokers and have no direct dealing with the public. The public sells securities to or buys from them through brokers.

 

BROKERS act as agents of individuals and firms who wish to buy or sell securities. The brokers sell or buy securities on behalf of their customer. They charge commission for performing these services.

 

 

EVALUATION:   

  1. Define money market

 

  1. Identify the financial institutions that operate in the money market

 

  1. identify the instruments used in the money markets

 

  1. List the advantages of money markets

 

  1. Define capital market

 

  1. Identify the financial institutions that operate in the capital market

 

  1. identify the instruments used in the capital markets

 

  1. List the advantages of capital markets

 

  1. Define primary market

 

  1. Define secondary market

 

  1. Explain the stock exchange market

 

  1. Identify the roles of the jobbers and the brokers

CLASSWORK: As in evaluation

CONCLUSION: The teacher commends the students positively