Answer to Question #172339 in Finance for Adam

Question

Consider a two-period economy here investors are endowed with income in both periods are face the same investment opportunities with certain outcomes.

Investors derive utility from consumption in both periods and the utility function is assumed to be increasing and concave.

Explain how the introduction of a perfect capital market influences investors consumption and production decisions. 

Answer 1

The stock market offers different financial instruments, such as shares, bonds, mutual funds, and derivatives. This provides investors a wide choice of products in which to invest their monies.

Technical development has influenced every aspect of modern living. The stock exchanges are also using various technical advancements to provide greater convenience to the investors.