Intro to Finance Essay Example for Free

innovation to Finance EssayAn efficient monetary system promotes intermediaries that successfully link savers from borrowers (Mankiw). There are both widely-known financial intermediaries namely the banks and coarse funds. Banks are highly accessible to the general public are mainly more cost advantageous that direct lending. Generally, the banks main purpose in the economy is to take in deposits from savers and use these deposits to make loans to people who want to borrow (Mankiw, N. Gregory, 2001, Principles of Economics, p. 557).Banks incur costs by paying liaison on these deposits and earn from these by charging higher interest rates on loan borrowers. Second to this, banks calculate an important role in the economy as they facilitate the purchases of effectives and services by holding people to pen checks against their deposits (Mankiw, N. Gregory, 2001, Principles of Economics, p. 557). In this manner, the economy benefits from banks by this accessible medium of exchange. Unlike stocks or bonds which are not as immediate, checks make it easier for the public to exercise their monetary transactions.Mutual funds, on the other hand, are institutions that use the reaping of selling shares in buying portfolios of stocks and bonds where they derive their profits. The financial markets become more accessible and efficient because mutual funds allow people with small savings to become owners and creditors of numerous companies. Also, mutual funds allow its shareholders the benefit of risk diversification wherein a single fund can carry a paradiddle of diverse portfolios in stocks and bonds.A broker can either be an individual or a corporate entity that earns a fee-based profit by performing buy and sell orders from investors and/ or clients. A good example of this is a brokerage firm that specializes in trading company stocks and securities. A brokers main functions in the financial market would include basic execution of buying and selling share s, and financial advisory to clients regarding the management of their shares/ stocks. With the emergence of automation and popular online brokerage firms, traditional brokers have redefined their place in the industry.Most popular online brokerage firms such as Ameritrade and E*Trade offer lower fees to investors as opposed to traditional brokers. Financial and Investment Advisory are also automated online via innovative enthronization software tools. With information becoming more accessible because of the internet, traditional brokers are now transitioning into online brokers wherein online orders are hushed routed to and monitored by them and with reduced client-interface for advisories.