Stock Markets are defined as the places where the prices of which instrument are established?

Stock Markets are defined as the places where the prices of which instrument are established?

• A. Bonds
• B. Firms' Stocks
• C. Commodities
• D. Currencies

Answer: (B)

Stock markets are places where the prices of ownership shares in firms are established. The price is set through the interaction of buyers and sellers—each side reveals how much they’re willing to pay or accept, and the market finding process (order matching, bids, asks) determines the current price. This price discovery for equities reflects collective judgments about a company’s future profits, risk, and growth prospects. Other markets exist for different instruments: bonds have prices driven by yields and credit risk, commodities by supply and demand for physical goods, and currencies by exchange rates and macro factors. So the instrument whose price stock markets establish is firms’ stocks.

Stock markets are places where the prices of ownership shares in firms are established. The price is set through the interaction of buyers and sellers—each side reveals how much they’re willing to pay or accept, and the market finding process (order matching, bids, asks) determines the current price. This price discovery for equities reflects collective judgments about a company’s future profits, risk, and growth prospects. Other markets exist for different instruments: bonds have prices driven by yields and credit risk, commodities by supply and demand for physical goods, and currencies by exchange rates and macro factors. So the instrument whose price stock markets establish is firms’ stocks.