1.Describe the functions of a financial market

1. **Connecting Buyers and Sellers**: Facilitates the meeting of buyers and sellers of financial assets without needing a physical location.
2. **Issuance and Exchange of Assets**: Supports the creation (primary markets) and subsequent trading (secondary markets) of financial assets.
3. **Price Determination**: Establishes the prices of financial assets through various pricing mechanisms, such as supply and demand or predetermined conditions.
4. **Public Information**: Disseminates information about asset prices, trading mechanisms, and pricing systems.
5. **Providing Liquidity**: Ensures that assets can be easily converted into cash without significant loss of value.
6. **Reducing Transaction Costs**: Lowers the costs related to finding counterparts and determining asset prices

2. Explain the basic characteristics of mutual funds (portfolio, units, net asset value, fees, profitability and risk) and illustrate the value of at least three of these characteristics

1. **Portfolio**: Aggregation of funds provided by investors, whose value changes due to market value fluctuations and investor transactions.
2. **Units or Shares**: Represent the investment unit in the fund, with the price determined by the net asset value (NAV).
3. **Net Asset Value (NAV)**: Calculated as the portfolio value divided by the number of shares, indicating the per-share value at a given time.
4. **Fees**: Include management fees, trustee fees, subscription and redemption fees, and other operating expenses affecting final profitability.
5. **Profitability**: Measured as the percentage change in NAV from the subscription to the redemption date.
6. **Risk**: Includes market risk (volatility) and interest rate risk (duration of fixed income assets).

- **Portfolio**: In 2023, the assets of domestic financial mutual funds in Spain showed significant growth due to favorable market conditions
- **Net Asset Value**: The daily NAV calculation ensures transparency and helps investors track the value of their investments
- **Fees**: Funds with higher TER (Total Expense Ratio) often show lower net returns, illustrating the impact of fees on profitability.