write the four types of markets and their features.
Dear Student,
Financial Market is a link between the savers and borrowers. those who have surplus money market transfers money or capital from them to those who are in need of investment.
Types of Financial markets are:
1. Money market- It is a market for a short term funds meant for use for a period of upto one year . It is a source of finance for working capital. Transaction in the money market includes lending and borrowing of cash for a short period of time , and also sale and purchase of securities.
2. Capital market- It is a market for medium and long term funds. Capital market includes all the organisations , institutions , and instruments that provide long term and also medium term funds. It does not include those institutions which provide short term funds.
Capital market is further divided into two markets those are:
i) Primary market- A new issue market is known as the Primary market. In the primary market, securities are sold for the first time, i.e. new securities are issued from the company. It directly contributes to the capital formation as it goes directly to investors and utilizes these funds for investments. Equity shares, debentures, bonds, preference shares are common securities issued in the primary market.
ii) Secondary market- Sale and purchase of previously issued or second hand securities are done in the Secondary market. In this market, securities are not directly issued by the company to investors. Securities are sold by existing investors to other investors. Companies get no additional capital as securities are bought and sold between investors only so directly there is no capital formation but the secondary market indirectly contributes to capital formation by providing liquidity to securities of the company.
Regards,
Financial Market is a link between the savers and borrowers. those who have surplus money market transfers money or capital from them to those who are in need of investment.
Types of Financial markets are:
1. Money market- It is a market for a short term funds meant for use for a period of upto one year . It is a source of finance for working capital. Transaction in the money market includes lending and borrowing of cash for a short period of time , and also sale and purchase of securities.
2. Capital market- It is a market for medium and long term funds. Capital market includes all the organisations , institutions , and instruments that provide long term and also medium term funds. It does not include those institutions which provide short term funds.
Capital market is further divided into two markets those are:
i) Primary market- A new issue market is known as the Primary market. In the primary market, securities are sold for the first time, i.e. new securities are issued from the company. It directly contributes to the capital formation as it goes directly to investors and utilizes these funds for investments. Equity shares, debentures, bonds, preference shares are common securities issued in the primary market.
ii) Secondary market- Sale and purchase of previously issued or second hand securities are done in the Secondary market. In this market, securities are not directly issued by the company to investors. Securities are sold by existing investors to other investors. Companies get no additional capital as securities are bought and sold between investors only so directly there is no capital formation but the secondary market indirectly contributes to capital formation by providing liquidity to securities of the company.
Regards,