Explain the functions of financial market.
Answers
Mobilization of Savings and channelizing them into Most Productive Use:
Financial markets act as a link between savers and investors. Financial markets transfer savings of savers to most appropriate investment opportunities.
Facilitate Price Discovery:
Price of anything depends upon the demand and supply factors. Demand and supply of financial assets and securities in financial markets help in deciding the prices of various financial securities.
Provide Liquidity to Financial Assets:
In financial markets financial securities can be bought and sold easily so financial market provides a platform to convert securities in cash.
Reduce the Cost of Transaction:
Financial market provides complete information regarding price, availability and cost of various financial securities. So investors and companies do not have to spend much on getting this information as it is readily available in financial markets