Question

Explain the major functions of Financial Market?

Answer 1

Major functions of Financial Market :-

• Price Determination: Demand and supply of an asset in a financial market help to determine their price. Investors are the supplier of the funds, while the industries are in need of the funds. Thus, the interaction between these two participants and other market forces helps to determine the price.

• Mobilization of savings: For an economy to be successful it is crucial that the money does not sit idle. Thus, a financial market helps in connecting those with money with those who require money.

• Ensures liquidity: Assets that buyers and sellers’ trade in the financial market have high liquidity. It means that investors can easily sell those assets and convert them into cash whenever they want. Liquidity is an important reason for investors to participate in trade.

• Saves time and money: Financial markets serve as a platform where buyers and sellers can easily find each other without making too much efforts or wasting time. Also, since these markets handle so many transactions it helps them to achieve economies of scale. This results in lower transaction cost and fees for the investors.

Answer 2

Answer:-

✏ Money markets which provide short term dept financing and investment. Derivatives markets, which provide instruments for the management of financial risk.

Types of financial Market

✒ Stock Market

✒ Bond Market

✒ Commodities Market

✒ derivatives Market

♠ Hope it's helpful ♠