Macro A2 - Role Of Financial Markets Flashcards
How do financial markets facilitate growth
Financial markets play an important role in facilitating economic growth by providing a mechanism for channelling funds from savers to borrowers. This allows businesses to access the capital they need to invest in new projects, expand their operations, and hire more workers. This, in turn, drives demand for goods and services and fuels economic growth.
How do financial markets lend to businesses
Financial markets provide businesses with several ways to obtain financing. One of the most common is through the issuance of bonds. A bond is essentially a loan that a business raises from investors by selling them a debt security. The bond will specify the terms of the loan, including the interest rate to be paid, the maturity date, and the regular interest payments (also known as “coupons”). Investors purchase the bonds with the expectation that they will receive regular interest payments and the return of their principal when the bond matures.
How do financial markets lend to individuals
One of the most common forms of credit for individuals is through personal loans, which are unsecured loans that are provided by banks, credit unions, and other financial institutions. Personal loans are typically used for a variety of purposes, such as consolidating debt, paying for home improvements, or financing a large purchase.
How do financial markets facilitate the exchange of goods/services
When an individual or business wants to purchase a good or service, they need a means of paying for it. Financial markets provide this means by facilitating the transfer of funds from the buyer to the seller. Also known as a bank loan.
How do financial markets provide forward markets in currencies & commodities
Financial markets provide forward markets in currencies and commodities as a way for businesses and individuals to manage the risks associated with fluctuations in the prices of these assets. A forward market is a market in which contracts are bought and sold for delivery of an asset at a future date
How do financial markets provide a market for equities
Financial markets provide a market for equities by bringing together buyers and sellers of stocks and providing a platform for the negotiation and execution of stock transactions. Equities, or stocks, represent ownership in a corporation and allow individuals and businesses to invest in the future success of a company.
