Download FinancialMarkets and InstitutionsMT481 " Financial MarketsDe and more Lecture notes Accounting in PDF only on Docsity! Financial Markets and Institutions1 Financial Markets and Institutions MT481 – Financial Markets Define the Roles of Financial Markets and Institutions I (and I alone) produced the paper Financial Markets and Institutions2 Financial markets have been the instrument our economists have used for decades to stabilize the economy and to allocate funds where appropriate. As an exchange of money, they will exchange in securities, derivatives, currencies, bonds. "A capital sector is a sector where it is possible to buy or sell financial assets (securities) such as stocks and bonds (Madura, 2020)". It is one of the most legalized networks, putting together merchants and customers to trade capital for their goods and services. The financial market must be open regarding its goods, such as prices and charges, trade laws and legislation, terms and conditions, policy and pricing. Financial markets allow us to borrow money to finance our education, our financial needs, and secure loans to pay for vehicles and mortgages and start our own companies. In financial markets and organizations, various positions somehow affect a productive economy. Corporate decisions such as capital investment and what types of shares to sell when funding operations are included in the accommodation of corporate finance criteria. Investment requirements are fulfilled by those who plan to invest in either debt or equity instruments (Madura, 2020). The task of depositary institutions is to recognize the danger of the load given, accept deposits from surplus units, and provide loans to deficit units through loans and securities purchases. The task of non-depositary financial institutions' task is to raise funds from sources and non-deposits and play a significant role in financial intermediation. Primary and secondary sectors are the two prominent vital positions. According to Madura, primary markets allow the issuing of new securities. Primary markets allow companies and governments to collect funds from new bonds and the selling of new stocks. The primary aim of the competition is to create new enterprises or to streamline existing ones. Primary Financial Markets and Institutions5 securities, we will need to swap the currency. We are going to risk money if markets are not doing well. A nominal interest rate, according to Nickolas, is an interest rate that does not take inflation into account. "This is the rate of interest quoted on bonds and loans (Tarver, 2020)." The interest rate that takes inflation into account is valid. Concerning the nominal interest rate, the actual interest rate accounts for inflation and includes a mortgage or loan at the real rate (Nickolas, 2020). To conclude, each institution is structured to safeguard lending and investing in the capital markets. Price versus secondary markets is more stringent in the primary sector. Regulators safeguard investors against theft and deceptive trading tricks. In a nutshell, the economy responds differently to contraction, supply, and demand and the effects of foreign currencies. Financial Markets and Institutions6 References Madura, J. (2020). Financial Markets & Institutions. [Purdue University Global Bookshelf]. Retrieved from https://purdueuniversityglobal.vitalsource.com/#/books/9780357130902/ Nickolas, S. (2020, September 30). Real vs. Nominal Interest Rates: What's the Difference? Retrieved October 27, 2020, from https://www.investopedia.com/ask/answers/032515/what-difference-between-real-and- nominal-interest-rates.asp Tarver, E. (2020, September 16). What are some examples of financial markets and their roles? Retrieved October 27, 2020, from https://www.investopedia.com/ask/answers/060515/what-are-some-examples-financial- markets-and-their-roles.asp
