6- The role of financial markets Flashcards
1
Q
Role of financial markets
A
- Facilitate saving
- Provide forward markets
- To lend to businesses + individuals
- Facilitate the exchange of goods and services
- Market for equities
2
Q
What are financial markets?
A
Where buyers and seller can buy and trade assets.
3
Q
What does facilitate saving do?
A
- Transfers spending power from present to future.
4
Q
What do forward markets do?
A
Allow firms to buy and sell in the future at a set price.
5
Q
What does the lending to firms and individuals do?
A
- Allows consumption and investment
- Acts as a financial intermediary
6
Q
How do financial markets facilitate the exchange of goods and services?
A
- By creating a payment system
7
Q
What do markets for equities do?
A
- Issues shares
- Raises capital for firms
- Allows shares to be sold
8
Q
Interest and rate of return set by financial intermediaries
A
- Financial institutions charge higher interest to borrowers than gives rate of return to lenders- to make profit.
9
Q
Examples of financial intermediaries
A
- Commercial banks
- Investment banks
- Pension funds
- Hedge funds
- Mutual funds
