3.3 Financial Markets

• One main purpose of financial markets is to facilitate the transfer of funds between savers and borrowers
• Which financial market is used for trading different currencies?

  Foreign exchange markets
• What is the role of diversification in managing financial risk?

  Spread risk across assets
• Financial markets provide a platform for the price discovery of assets
• What are the three main types of financial markets?

  Capital, money, forex
• How do financial markets determine the prices of assets?

  Supply and demand
• Foreign exchange markets enable cross-border transactions and risk management
• Order the main purposes of financial markets.

  1️⃣ Facilitate the transfer of funds

  2️⃣ Provide a platform for price discovery

  3️⃣ Manage financial risk
• Match the type of financial market with its primary function:

  Capital Markets ↔️ Long-term financing

  Money Markets ↔️ Short-term financing

  Foreign Exchange Markets ↔️ Currency trading
• Foreign exchange markets deal with the buying and selling of different currencies.
• Match the function of financial markets with its description:

  Transfer of Funds ↔️ Mobilizes capital for investment

  Price Discovery ↔️ Establishes asset values

  Risk Management ↔️ Reduces financial risk
• Financial intermediaries reduce transaction costs by matching buyers and sellers.


  True
• What type of assets are traded in capital markets?

  Stocks and bonds
• What are the primary functions of foreign exchange markets?

  Currency trading and risk management
• What types of assets are traded in money markets?

  Treasury bills and commercial paper
• Financial markets enable savers to lend their funds to borrowers, facilitating investment and economic growth
• Match the function of financial markets with its key aspect:

  Transfer of Funds ↔️ Mobilizes capital

  Price Discovery ↔️ Reflects supply and demand

  Risk Management ↔️ Allows hedging
• Financial intermediaries assess creditworthiness to price loans accordingly.


  True
• What are the key factors affecting financial market operations?

  Economic conditions, interest rates, regulations, investor sentiment, and technology
• Order the common types of financial market regulations:

  1️⃣ Disclosure Requirements

  2️⃣ Capital Requirements

  3️⃣ Trading Rules

  4️⃣ Suitability Standards
• Order the main functions of financial markets:

  1️⃣ Facilitate the transfer of funds

  2️⃣ Provide a platform for price discovery

  3️⃣ Manage financial risk
• Match the type of financial market with its key functions:

  Capital Markets ↔️ Facilitate long-term financing

  Money Markets ↔️ Provide short-term financing

  Foreign Exchange Markets ↔️ Determine exchange rates
• Financial markets are places where financial assets are traded.
• What type of financial asset is traded in money markets?

  Treasury bills
• Money markets involve trading of long-term assets.

  False
• One of the primary functions of financial markets is to facilitate price discovery of assets.


  True
• Financial intermediaries assess risk and price loans accordingly.
• Match the factor affecting financial markets with its impact:

  Economic Conditions ↔️ Drive market confidence

  Interest Rates ↔️ Influence borrowing costs

  Investor Sentiment ↔️ Affects asset values

  Technology ↔️ Enhances market efficiency
• Foreign exchange markets deal with the buying and selling of different currencies.
• Key participants in capital markets include investors, companies, and governments
• Match the financial market with its primary function:

  Capital Markets ↔️ Long-term financing

  Money Markets ↔️ Short-term financing

  Forex Markets ↔️ Currency trading
• Diversification and hedging strategies are used in financial markets to manage risk.

  True
• Financial intermediaries reduce transaction costs by matching buyers and sellers
• Match the role of financial intermediaries with its benefit:

  Facilitating Transactions ↔️ Enhances market efficiency

  Assessing Risk ↔️ Promotes informed investment

  Providing Liquidity ↔️ Ensures availability of funds
• Interest rates influence borrowing costs and investment returns.

  True
• Capital requirements ensure firms hold sufficient funds to absorb losses.

  True
• What is the main purpose of financial markets?

  Facilitate fund transfer
• Match the type of financial market with its description:

  Capital markets ↔️ Long-term assets like stocks

  Money markets ↔️ Short-term assets like treasury bills

  Foreign exchange markets ↔️ Trading of different currencies
• Financial markets facilitate the movement of funds from savers to borrowers.


  True
• Money markets primarily involve participants such as banks, corporations, and financial institutions