What are the main functions of financial markets as described in Chapter 2?

The main functions of financial markets include allocating savings to borrowers, facilitating the issuance and trading of securities, and providing investment opportunities that reflect varying risks and returns. They connect savers and borrowers, enabling businesses to raise capital and individuals to invest their savings effectively.

Financial markets serve several key functions. They allocate the supply of savings in the economy to individuals and companies that need funds. This includes the primary market, where new securities are issued and sold for the first time, allowing firms to raise money directly. The secondary market allows for the trading of previously issued securities, providing liquidity for investors. Additionally, financial markets offer a range of investment opportunities with different risk-return profiles, helping investors meet their financial goals while supporting businesses in financing their operations.