Markets Coursework Example | Topics and Well Written Essays - 1500 words

Markets - Coursework ExampleThe latter performs the process of lending after purchasing securities from the market instead of directly giving turn out loans. These include insurance companies, investment trusts, pension funds, mutual funds and so on. The major final result of financial intermediaries is to ensure that at tout ensemble times in that respect is a steady flow of funds, including cash, which moves smoothly from the surplus units to the deficit units. This in turn will result in regular investments to boast the economy and attention support the growth of activities in the market in general. By doing so the ideal funds will be utilized in the best way, which other than would have generated only a marginal interest. Financial intermediaries who match the lender with the borrower help both by reducing their transaction costs. They also provide in-depth culture to their clients to provide them with the best accessible source of investing their money. Information costs are substantially costs are reduced for both parties, namely the lender and the borrower, since they dont have to spend resources from their own end to dig out extensive information. Hence, it is not surprising to know that in United States solo roughly 24.4% of firm investment was financed through bank loans that were taken from 1970 1985. (Gorton & Winton, 2002) This proves that bank loans (financial intermediaries) are the primary source of external financing globally no question whether it is a developing or a developed country. Therefore, one end state that financial intermediation is the root institution in the savings-investment process. (Gorton & Winton, 2002) An outcome of this is that a large number of individuals and firms come together to make this happen, so that in case if one party fails to give a loan, another is available to support that. The huge pool ensures a constant availability of both capital and expertise which is available for all. The whole process can be summed up as a value-creating economic process. (Scholtens & Wensveen, 2003) It can be concluded that financial intermediaries are not only providing a place for investors to borrow from, rather their lineament is more diverse and comprehensive. They are constantly and actively working to offer products that an individual investor can barely provide to a saver. This is the advantage of cover for danger, the basic reason behind why every saver will trust in a financial intermediary. Question 2 Stock markets all around the globe are the ideal modes of generating funds for businesses or companies that want to fulfill their capital requirements. It provides a very comprehensive way for investors to choose from a variety of stocks that best suit their needs (mainly risk and return). Any investor can select his own set of stocks of as many companies as he similar and create a portfolio to reduce his risk in the market. One of the major roles of stock markets in the financial system is to provide the feature of liquidity. This means that an investor can at any given time trade his security for cash when the market is operating. (Rohit, 2008) The incentive offered by this feature makes it a very promising device driver of growth in an economy. The amount of trade or activity going on