SHORT ESSAY
QUESTION 1
A market is a “place” where goods and services are exchanged. a. Physical assets markets are the markets for such products as wheat and machinery. Also known as tangible markets while financial asset markets deal with stocks, bonds, and other claims on real assets. b. Spot markets are markets in which assets are bought or sold for “on the spot delivery” while futures markets are markets in which participants agree to buy or sell asset at a future date. c. Money markets are for short term, highly liquid debt securities, the ones that mature in less than a year while capital markets are the markets for long term debt and corporate stocks. d. Primary markets are the markets in which corporations sell newly issued securities to raise capital while secondary markets are the markets in which existing securities are traded among investors. e. Public markets are the markets where standardized contracts are traded on organized exchanges while private markets are the markets where transactions are worked out directly between two parties.
QUESTION 2 a. Financial markets tend to lower search and transactions costs in the economy. This is possible by providing a large array of financial products, with varying risks and pricing structures. This allows investors to compare cost of financing to their expected return on investment, thus making the investment choice that best suits their needs. b. Financial markets provide products to consumers and financial intermediaries allow for the mobilization of money between savers and borrowers- share market. The share market is a financial market in which investors buy or sell. It allows consumers to attain part-ownership of a company and further wealth, hence it reallocates resources and mirror overall economic growth. c. They allow those who have excess funds to make