SELECT * FROM question_mgmt as q WHERE id=5306 AND status=1 SELECT id,question_no,question,chapter FROM question_mgmt as q WHERE courseId=3 AND subId=20 AND chapterId=599 and ex_no='2' AND status=1 ORDER BY CAST(question_no AS UNSIGNED) CBSE Free NCERT Solution of 12th business-studies Financial Markets what are the functions of financial market

Question:

What are the functions of Financial Market?

Answer:

Financial Market plays an important role in the allocation of scarce resources in an economy by performing four important functions:

  1. Mobilization of saving and channelising them into the Most Productive Uses: A financial market facilitates the transfer of savings from savers to investors. Thus, it helps in Channelising surplus funds into the most productive uses.

  2. Facilitating price discovery: Households represent the supply of funds and the business firms represent the demand. The interaction between the demand and supply helps in the price discovery of financial asset, which is being traded in a particular market.

  3. Providing liquidity to financial assets: Financial market facilitates easy purchase and sale of financial assets. In doing so, they provide liquidity, which means that financial assets are easily converted into cash whenever required.

  4. Reducing the cost of transactions: Financial markets provide a common platform where buyers and sellers meet. It helps in saving time, effort and money of the buyers and sellers at the time of trading in the market, by providing them valuable information.


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