Question

1. 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 eases financial transaction between buyer and seller.

E.g. If company wants capital for expansion they can issue share/debt to get the capital to people. Also, people who want the particular company's share or debt can trade in the secondary market.

If an individual/corporate wants loan, he/she can approach to a bank which will give her the loan.etc.

So, financial market is very important to society to meet society's monetary decision.

Financial market brings buyer and seller together to carry out the transaction in exchange for interest income or capital appreciation etc.

There are many asymmetric problems in society. Most of the people are not financially literate. Most of the people are not aware of latest updates in financial market. This problem persists and matters to society because it does not allow an individual to solve his own financial problem by himself and always has to depend on a professional or broker who can manipulate the fact to exploit his wealth for his own benefit.