Week 2 Study Questions

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Week 2 Study Questions:

14-1.
What are financial markets? What function do they perform? How would an economy be worse off without them?

Financial markets are the key ways in which assist people with selling, purchasing, and as well as trading financial securities such as bonds and stocks. Financial markets for all intents and purposes divert funds from agents to lenders. Various types of financial markets are commodity markets, capital markets, bond markets, money markets, and even insurance markets. Borrowers would require finding their own lenders if there were no fiscal markets. On the other hand, financial institution makes this especially simple for borrowers by taking deposits and lending funds in a controlled approach. Financial markets basically provide savings to those with a necessity of funds. The economy undoubtedly would experience difficulty if negated of a fiscal market system for the reason that of a lack of overall capital. Therefore, daily business activities would lack the financial support. 14-3.

Distinguish between the money and capital markets.

Money markets provide individuals with both lending and borrowing for a decided period of time; furthermore they involve short-term maturities. In contrast, capital markets protect long-term maturities, which significantly assist companies to increase required capital. Essentially money markets generate transactions possible using short-term financial means, while capital markets make transactions possible using long-term financial methods. 14-4.

What major benefits do corporations and investors enjoy because of the existence of organized security exchanges?

The key advantages are with both corporations and investors which can have success and include the guarantee that their investment is provided at a reasonable market value, as well as the capability to assist companies in raising new capital. For one it offers a nonstop market, Second it sets up and advertises...
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