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Question
Answer the following question.
How does Financial Market facilitate the 'Price Discovery' of financial assets?
Solution
In financial markets, there are two players i.e. the households and the business firms. Here the households act as the suppliers of funds and the business firms make the demand. Now, we know that the price is determined when demand meets supply, so in such markets as well, wherever the demand meets supply, the price for that financial asset that is being traded-in that market is determined.
RELATED QUESTIONS
Distinguish between Primarymarket and Secondary Market.
These days, the development of a country is also judged by its system of transferring finance from the sector where it is in surplus to the sector where it is needed most. To give strength to the economy, SEBI is undertaking measures to develop the capital market. In addition to this, there is another market in which unsecured and short-term debt instruments are actively traded every day. These markets together help the savers and investors in directing the available funds into their most productive investment opportunity.
1) Name the function being performed by the market in the above case.
2) Also. explain briefly three other functions performed by this market.
The financial market plays an important role in the allocation of scarce resources in an economy by performing many important functions.’ Explain any three such functions
Distinguish between the following.
Money market and Capital market.
What are the functions of Financial Market?
Match the pairs :
| Group "A" | Group "B" | ||
| 1. | Private placement | a. | Recurring Deposit |
| 2. | N.S.D.L | b. | Dividend |
| 3. | Overdraft facility | c. | Evidence of deposit |
| 4. | Deposit receipt | d. | Interest |
| 5. | Returns on share | e. | Depository out of India |
| f. | A public company collecting capital privately |
||
| g. | Depository in India | ||
| h. | Evidence of ownership | ||
| i. | A private company collecting capital privately |
||
| j. | Current account |
Write a word or a term or a phrase which can substitute the following statement :
A definite promise in writing from a buyer for paying the amount on a specific Date.
Answer the following question.
What is meant by the 'Allocative Function' of Financial Markets?
Select the correct answer from the options given below and rewrite the statement.
When the trade bills are accepted by commercial banks it is known as _________.
Select the correct answer from the options given below and rewrite the statement.
____________ is the market for borrowing and lending long term capital required by business enterprises.
Answer in one sentence.
What is financial market
Explain the following term/concept.
Capital market
______ is short-term finance repayable on demand, with a maturity period of one day to fifteen days.
Tractors Pvt. Ltd. producing 2,00,000 trucks and generating revenue of Rs. 2,000 crores annually, has recently acquired the world's second largest truck manufacturing company. After this acquisition, Tractors Pvt. Ltd. will become the world's largest truck manufacturer. For financing the acquisition, the company had to arrange about Rs. 1,00,000 crores through debt and equity. ______ function is being performed by the company for arranging the funds through debt and equity.
Which of the following statements is incorrect regarding Financial Markets?
Match the pairs:
| Group 'A' | Group 'B' |
| (a) Investment in debenture | (1) Deals with acquisition and use of capital. |
| (b) Financial market | (2) Must inform the stock exchange about dividend declaration. |
| (c) Price of shares mentioned in the prospectus | (3) Trading of financial securities |
| (d) Corporate finance | (4) Safe and secure investment |
| (e) Listed company | (5) Must inform the government about dividend declaration |
| (6) Fixed price issue method | |
| (7) Risky investment | |
| (8) Trading of commodities. | |
| (9) Deals with acquisition and use of assets. | |
| (10) Book-Building Method. |
Distinguish between:
Primary Market and Secondary Market
