Role of Financial Markets

Question 1

What are the roles of the financial market?

Answer 1

To facilitate savings
They lend to businesses and individuals
They facilitate the exchange of goods and services
They provide forward markets in currencies and commodities They provide a market for equities

Question 2

How do commercial banks facilitate savings?

Answer 2

Accepting deposits to provide security and to facilitate savings
Lending money to different economic agents
providing an efficient means of payment

Question 3

How to investment banks facilitate savings?

Answer 3

The key function is to help companies, the government and other institutions
Buy and sell corporate and government bonds

Question 4

How do banks offer primary source of lending?

Answer 4

Issuing corporate bonds
Bank borrowing

Question 5

How do banks facilitate the exchange of goods and services?

Answer 5

Store and access money
Provide security for buyer and seller
Facilitates product markets, making it east to exchange goods and services

Question 6

How do banks provide forward markets in currencies and commodities?

Answer 6

Allow economic agents to set the price of a asset today for delivery in the future
The forward market is used by firms that import/export and those that deal in commodities with volatile prices

Question 7

How do banks provide markets for equities?

Answer 7

They help issue share
They provide a market for buying and selling shares