ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Financial institutions are sufficiently developed
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Finance is available at a reasonable cost
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Capital is most productively allocated
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All of these
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Detailed explanation-1: -An ideal capital market is one: 1. Where finance is available at reasonable cost. 2.
Detailed explanation-2: -An ideal capital market is defined by a set of five assumptions. 1: Capital markets are frictionless. 2: All market participants share homogenous expectation, value relevant information is costlessly available to all market participants. 3: All market participants are atomistic.
Detailed explanation-3: -Basic Assumption given by Merton Miller for perfect capital markets are: The critical assumptions of the M-M are perfect capital markets; rational behaviour, absence of flotation costs, tax-free world; no transactions costs, infinitely divisible securities; given investment policy; and, finally, perfect certainty.
Detailed explanation-4: -A capital market is a financial market in which long-term debt or equity-backed securities are bought and sold, in contrast to a money market where short-term debt is bought and sold.
Detailed explanation-5: -The term capital market includes the stock market, bond market, and related markets.