Final answer:
Capital markets function to match large corporations with surplus cash to individuals who want to borrow money. These markets facilitate the investment of savings for a return, through instruments like stocks, bonds, and mutual funds. Financial investors actively trade these securities within the market, providing liquidity and investment opportunities. b. Find a job
Step-by-step explanation:
The question you've asked relates to the functioning of capital markets in the economy. In large corporations, when there is surplus cash, capital markets match these corporations with individuals who want to borrow money. This system allows companies to invest in various financial instruments and individuals to find investment opportunities that provide a return. For example, banks accept deposits and convert them into long-term loans for companies, and individual firms raise capital through selling shares of stock or issuing bonds.
Investors can buy stock in a company and potentially receive returns based on the company's performance. Financial investors trade stocks and bonds amongst each other, and entities like venture capitalists and angel investors look for promising startups to invest in. Furthermore, mutual funds pool together stocks and bonds from various companies, offering a diversified investment portfolio.
Financial capital markets are integral in enabling the flow of funds from savers, who are the suppliers, to the borrowers, who are the demanders. This mechanism includes various financial investment tools such as stocks, bonds, and bank loans, providing opportunities for households to invest and earn returns on their savings.