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Capital Markets are a way to connect investors and borrowers. Borrowers get access to capital and investors get returns from their investment. These returns can be in the form of dividends, coupon payments or appreciation of the instruments. The downside risk is default by the borrowers as well as the reduction in the price of instruments. Borrowers are enterprises or governments. Investors are individuals or public and private institutions. Capital markets are an important component of the economy. Capital markets include the bond market (the largest market) and the stock market. It can also include derivatives.
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