Question

What do financial markets do? Why are financial markets important to a society? How do financial markets accomplish what they do? What are asymmetric information problems and why would this problem in financial markets matter to society?

Answer 1

Financial market facilitates between buyer and seller.Financial market provide capital to company for it's expansion by different modes of equity and debt.They provide businesses access to capita.They also provide employment to people in the society who work in the financial industty.

Financial markets allows companies to fnance themselves by raising capital, This allows them to finance their projects by having access to long-term finance.Financial markets offer the opportunity to invest capital in exchange for a return called a dividend and capital appreciation and the prospect of added value if their assets appreciate.

Asymmetric information means that one party has better information than the other when making decisions . The imperfect information causes an imbalance in market.Accurate information is essential for sound economic decisions. When a market experiences an imbalance it can lead to market failure.