Financial Markets
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What is the basic purpose of a financial market?
How do money and capital markets differ?
How do primary and secondary financial markets differ?
Describe the concept of market efficiency. What are the three different levels of market efficiency?
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Solution Summary
The solution describes the purpose of financial markets, the difference between money and capital markets, and primary and secondary markets. Market efficiency is conceptualized as well.
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The very basic purpose of a financial market is to have a system by which firms can raise capital and investors can realize a return.
Money markets trade short term assets such as commercial paper, currencies, Treasury bills (collectively, 'paper') whereas capital markets deal in equity and bonds which are more long term type of assets. Money markets are generally less volatile and, accordingly, provide a lower return for investors.
Primary markets ...
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