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Questions
State the functions performed by financial market.
State any four functions of financial market.
State the functions of financial market.
Solution
Financial market is a common platform where buyers and sellers of securities interact and exchange their holdings of bonds such as shares and debentures. Functions of a financial market:-
i. Channelisation of funds:- Financial markets primarily operate to channelise funds from the investors to the companies. It serves the dual purpose of providing investors with an interest on their funds and providing companies with the required finance to pursue their business operations.
ii. Determining the price:- The determination of fair price of securities is facilitated by financial markets as it provides a place where buyers can meet sellers and undertake different transactions of securities. Such a commonplace ensures trading at a fair and justifiable price of the security which is determined by the opposite forces of demand and supply.
iii. Ease of convertibility in cash:- Because financial markets operate in a transparent and legal manner for the purchase and sale of securities, any person can convert his bonds into cash or cash equivalent at any particular time in a hassle-free manner.
iv. Minimising brokerage and other transaction charges:- Financial markets aim at the minimisation of unnecessary brokerage and transfer charges levied by different dealers by making the relevant information available at all times. It also aims to digitalise the transaction for optimisation in terms of time and cost.
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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
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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.
Select the correct answer from the options given below and rewrite the statement.
A financial market is a market in which people trade _____________ and derivatives at low transaction costs.
Write a word or a term or a phrase which can substitute the following statement.
A market where people trade financial securities and derivatives at low transaction cost
State whether the following statement is true or false
A Financial Market is a market in which people trade financial securities and derivatives at high transaction costs.
Explain the following term/concept.
Financial market
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Answer the following question
State the features of capital market.
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Which of the following statements is incorrect regarding Financial Markets?
Full form of IFCI
Match the various terms of Financial Markets Column - I with their respective Statements in Column - II
| Column - I | Column - II | ||
| a. | Financial market | i | It is also known as the Stock market |
| b. | Primary market | ii | It is a market for creation and exchange of financial assets. |
| c. | Secondary market | iii | It is also known as New issue market |
Correct the underlined word and rewrite the following:
IPO is offered to existing equity shareholders.
The allocative function of Financial market helps in ______.
