WAEC Commerce 2020 Theory — Question 5

Model answer

(a) Functions of stock exchange: It serves as market for buying and selling of financial securities; It gives update on prices of stocks regularly; It serves as platform for buyer and sellers to meet; It comprises professionals who can provide financial advice to both the company and investors. (b)(i) Debenture is a financial document which specifies a company's indebtedness to the bearer. It attracts fixed interest and has a maturity date. (ii) Bonds: A bond is referred to as a fixed income instrument since bonds traditionally paid a fixed interest rate (coupon) to debt holders. (iii) Shares: Shares can be defined as a unit of ownership in a limited liability company. The holder is entitled to dividends and can attend the annual general meeting. (iv) Stock: this can be defined as the name for all securities traded in the money market such as shares, bonds, debentures etc.