What are the main functions of financial market?

1.	What are the main functions of financial market?
Answer» The functions of a financial market are : (a) Mobilisation of savings and channeling them into the most productive uses: It is a forum which facilities the flow of capital from investors to borrowers and, thus, funds are utilised for productive purpose. (b) Facilitating price Discovery: Price for the financial assets is determined by the equality of demand (business firms) and supply (households) forces in the financial market. (c) Providing liquidity to functional assets: Convertibility of financial assets into cash is done easily through mechanism of the financial markets. (d) Reducing the cost of transactions: Financial markets save a lot of time and efforts of the buyers and sellers by providing a forum through which they can meet each other to fulfill their needs.

Answer»

The functions of a financial market are :

(a) Mobilisation of savings and channeling them into the most productive uses: It is a forum which facilities the flow of capital from investors to borrowers and, thus, funds are utilised for productive purpose.

(b) Facilitating price Discovery: Price for the financial assets is determined by the equality of demand (business firms) and supply (households) forces in the financial market.

(c) Providing liquidity to functional assets: Convertibility of financial assets into cash is done easily through mechanism of the financial markets.

(d) Reducing the cost of transactions: Financial markets save a lot of time and efforts of the buyers and sellers by providing a forum through which they can meet each other to fulfill their needs.

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