Financial markets

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All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).

 

 

Q1. “The more risk-averse people are, the more likely they are to diversify.” Is this statement true, false, or uncertain? Explain your answer.

Q2. Define the concept of Standard Deviation and how to help to evaluate different investment choices?

Q3. Explain the relation between Interest rate and Bonds quantity level?

Q4. Do credit rating agencies do a good job at assessing credit risk?

Q5. Emphasise fundamentals of financial institutions within financial markets? Outline the role of financial intermediates and how important to financial systems?

Q6. Why do financial markets exist? How would the economy function without them? What are the potential disadvantages of financial intermediaries? Discuss

Answer preview

Financial markets are essential in facilitating the production of goods and services and creating capital through financial activities such as investment and saving(Amidu & Issahaku, 2018). In economies with poorly developed financial markets, there is a reduced flow of income, and it isn’t easy to generate capital. Moreover, when the rate of savings is low, leading to decreased investments. Financial intermediaries often increase the fees charged for their services, lowering the possible return on investment.

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Financial markets