Principles of Finance I Marketing Assignment Paper

Principles Of Finance I
Name
Institution
Date
The role of financial institution in reducing transaction costs
When buying and selling securities, different types of information are crucial for both buyers and sellers to make decisions that are more informed. However, obtaining information takes time and money to obtain (Kidwell et al., 2016). Many financial institutions make all the information available without spending much money, therefore, financial institutions play the major role assisting both buyers and sellers of securities in reducing costs of transactions (Kidwell et al., 2016). Financial markets perform the main task of matching savers and borrowers, when borrowers successfully raise funds in the financial market; saver use the information in the market to make informed allocation decisions (Kidwell et al., 2016).
The cost savers and borrower incur makes it difficult for a good borrower to raise money in the financial market. That is why borrowers are willing to pay to obtain information about the market prospects (Kidwell et al., 2016). Financial institutions offer such information at a smaller fee for savers who seeks information about borrowers and borrower who want information about prospective savers (Kidwell et al., 2016). Financial institutions reduce transaction costs by acting as intermediaries between two clients, saving transaction costs if they were to deal directly with the market.
The financial institution provides transaction services like discount brokerage and offer advisory services that greatly reduce information costs (Kidwell et a...