4.4.1 Role Of Fincial Markets ✅

Question 1

What is the financial markets role?

Answer 1

• Facilitate savings.
• Lend to businesses + individuals.
• Facilitate exchange of g/s.
• Provide forward markets.
• Provide market for equities.

Question 2

How do financial markets facilitate savings?

Answer 2

• Financial institutions provide a safe platform for people to save money. (Savings accounts)
• Encourage it through interest payments.

Question 3

How does the financial market facilitate lending?

Answer 3

• Is the intermediarie between lenders and borrowers.
• Savings are used to give out to borrowers.
• Assess borrowers credit worthiness.
• Direct funds to productive uses.

Question 4

How does the financial market facilitate the exchange of g/s?

Answer 4

• Provide payment services. (Electronic fund transfers + debit/credit cards).
• This secure/efficient transferring supports everyday transactions.

Question 5

How does the financial market provide forward markets in currencies and commodities?

Answer 5

• Financial institutions provide forward contracts for currencies or commodities (their rate fluctuates).
• Allow parties to lock in prices/ reduce uncertainty associated with international trade.

Question 6

How does the financial market private a market for equities?

Answer 6

• Institutions act as an intermediary and allow individuals or institutions to buy and sell public ally traded companies/stocks.
• Done on stock exchange.
• Investors able to own corporations/benefit from gains.

Question 7

Summaries financial institution?

Answer 7

They promote saving, lending, transactions, manage risk and provide investment opportunities.