financial markets are the institutions that are the intermediaries between savers with borrowers.
The bond Market.
-Bonds are I.O.Us an example of debt finance.
-Bonds can be short terms, such as a few months, or long term years before maturity.
-Bonds with a higher credit risk earn more interest.
-Junk bonds are very high risk.
The Stock Market.
-Stock represents ownership in a firm.
-Equity finance is the sales of stock to raise to raise money.
-The stock exchange is the secondhand market for shares (the business receives no money itself when stocks exchange hands).
-The price of shares is determined by supply and demand.
-The stock index is computed as the average of a group of share prices.