Class 12 Business Studies - Chapter Financial Markets NCERT Solutions | What are the main functions of the finan

Welcome to the NCERT Solutions for Class 12th Business Studies - Chapter Financial Markets. This page offers a step-by-step solution to the specific question from Extra Questions, Question 4: what are the main functions of the financial marke....
Question 4

What are the main functions of the financial market?

Answer

The financial market performs various critical functions:

  • Facilitates Price Discovery: The forces of demand and supply in financial markets help in determining the prices of financial instruments.
  • Liquidity Provision: It allows investors to buy and sell securities, providing liquidity to the assets.
  • Reduces Transaction Costs: The availability of a well-functioning market reduces the cost involved in searching for buyers and sellers.
  • Mobilizes Savings: It helps in channeling the surplus funds from savers to those needing capital for productive use.
  • Risk Sharing: Financial markets provide instruments that help in diversifying and managing risk.

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