窗体顶端

FM: Assignment No. 1

Overview
What is Financial Markets

A financial market is a market in which people trade financial securities,

commodities, and other fungible items of value al low transactions costs and at
prices that reflect supply and demand. Securities entail stocks and bonds and
commodities include precious metals or agricultural goods. Financial instruments
are exchanged or traded.

What are the Roles of Financial Market?

Financial markets play a key role in the economy by stimulating growth, influencing
the economic performance of all the actors, affecting economic welfare. In terms of
functions, financial markets do perform several functions that deserve to be
underlined.

What are the securities traded in financial markets?

Debt securities are certificates that represent debt incurred by the issuer. For eg- If
the Government issues debt security worth Rs.100 to you, it means that the
Government has incurred a debt or borrowed Rs.100 from you. This certificate
represents your claim of Rs.100 on the Government.

Equity securities (stocks) are certificates that represent equity or ownership in the
issuer. For eg- A new company issues stock/ shares worth Rs.100000. You buy
shares worth Rs.10000 (10 % of the total shares). It means that you have a 10 %
ownership stake in the company.

Money Market Securities: These are debt securities with maturity of less than 1
year.

Capital Market Securities: These are securities with maturity of more than 1 year.

What are the Roles of Financial Institutions?

The primary role of financial institutions is to provide liquidity to the economy and
permit a higher level of economic activity than would otherwise be possible.