An institution where stocks and shares are traded is called a:

The correct answer is Option (1) → stock market

A stock market is an institution where stocks and shares are traded.

In a foreign exchange market, currencies are bought and sold. A commercial bank and a mutual fund are financial institutions; they may buy shares, but they are not the place where shares are traded.

Note: The Glossary at the end of the book gives short, exact meanings of terms like stock market. These one-line entries are an easy source of questions, so go through them once.