Topic: “Emphasize fundamentals of financial institutions within financial markets? Outline the role of financial intermediates and how important to financial systems?”. Discuss (150 Words)
You are required to reply to at least two peer responses to this week’s discussion question. Your replies need to be substantial and constructive in nature. (150 words for both replies)
You can add to your discussion from online resources, BUT YOU HAVE TO CITE YOUR WORK.
Please find the peer responses below:
1- Emphasize fundamentals of financial institutions within financial markets?
Financial institutions create a healthy and vibrant economy by providing a financial system that moves funds from people who save to people who have productive investment opportunities.
Outline the role of financial intermediates and how important to financial systems?
Financial intermediaries have the ability to avoid the free-rider problem as long as they make primarily private loans. Private loans are not traded, so no one else can free-ride on the intermediary’s monitoring and enforcement of the restrictive covenants. The intermediary making private loans thus receives the benefits of monitoring and enforcement and will work to shrink the moral hazard problem inherent in debt contracts.
2- Fundamentals include the basic qualitative and quantitative information that contributes to the financial or economic well-being of a company, security, or currency, and their subsequent financial valuation. Where qualitative information includes elements that cannot be directly measured, such as management experience, quantitative analysis (QA) uses mathematics and statistics to understand the asset and predict its movements.
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