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2. Capital Market Definition
The Capital Market is a market for several long-term investment instruments which can be traded, whether in the form of debt or self-own capital
equity Darmadji and Hendy, 2001. Capital market enables corporations to issue the security in the form of certificate of indebtedness bond or the
certificate of ownership stock. Through the existence of capital market, this would be possible for the parties who has surplus of fund lender to move their
fund to another parties who are deficit in fund borrower. The parties who have the surplus of fund can invest their money to the parties who are deficit with the
expectation to get the return, while the issuer in this case the corporate can utilize the fund for its interest to make its business growth without depending on
the operational activity of the corporate. Capital market has many advantages which can be categorized as economic
advantage and financial advantage. On the economic side, capital market is expected to boost economic activity because capital market is becoming a funding
alternative for the corporations so that the corporations can operate in the higher scale which eventually can increase its revenue and prosperity of the society.
While in the financial side, capital market is expected to become the source of financing long term for the corporations and enable investor to diversify its
investment.
3. Capital Market Instrument
Stock exchange instrument consist of promissory notes that can be traded through the stock exchange. Capital market instruments which currently traded at
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Indonesia Stock Exchange IDX are classified into three types; stocks, bonds, and rights
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a Stock The capital stock of a business entity represents the original capital paid
into or invested in the business by its founders. Stock typically takes the form of shares of either common stock or preferred stock. As a unit of
ownership, common stock typically carries voting rights that can be exercised in corporate decisions. They include the right to receive dividend
payments typically from earnings, if authorized by the board of directors and the power to sell the stock liquidity rights and realize capital gains
on public trading markets or in private transactions. On the other hand, preferred stock differs from common stock in that it typically does not
carry voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other
shareholders. b Rights
Rights are the right given to the old shareholder to buy new additional shares issued by a particular company.
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c Bond Bond is a debt security, in which the authorized issuer owes the holders a
debt and, depending on the terms of the bonds, is obliged to pay interest the coupon andor repay the principal at later date, termed maturity. A
bond is a formal contract to repay borrowed money with interest at fixed intervals.
B. Investment
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