ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Institution that helps channel funds from savers to borrowers.
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Funds that pool the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets.
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Either A or B
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None of the above
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Detailed explanation-1: -What Is a Financial Intermediary? A financial intermediary is an entity that acts as the middleman between two parties in a financial transaction, such as a commercial bank, investment bank, mutual fund, or pension fund.
Detailed explanation-2: -The institutions that are commonly referred to as financial intermediaries include commercial banks, investment banks, mutual funds, and pension funds.
Detailed explanation-3: -A financial intermediary does this by borrowing funds from the lender-savers and then using these funds to make loans to borrower-spenders. For example, a bank might acquire funds by issuing a liability to the public (an asset for the public) in the form of savings deposits.
Detailed explanation-4: -Financial markets are the institutions through which savers can directly provide funds to borrowers.
Detailed explanation-5: -Financial Intermediaries = institutions that help channel funds from savers to borrowers. 3 advantages of financial intermediaries = share risks, provide information, provide liquidity to investors.