Fin 370

Week 2

Individual Assignment

Chap. 14 Questions 14-1, 14-3, 14-4

Chap. 15 Questions 15-12A, 15-13A

Question 14-1

What are financial markets? What function do they perform? How would an economy be worse off without them?

Financial markets report price for each good; they are institutions and procedures that facilitate transactions in all types of financial claims (securities). They exist in order to allocate the supply of savings from those economic units with a surplus to those with a deficit.

Each financial market has a different function that they perform. For example, the stock markets primary function is to provide a platform for investors to buy shares of ownership of a public corporation which are sold to investors to allow the companies to raise a lot of cash at...