1 Describe the process by which the financial markets would operate to transfer the funds from...

1 Describe the process by which the financial markets would operate to transfer the funds from savers to the borrower (the student).

2 What is meant by a financial intermediary? Is there a financial intermediary in this case? If so, who/what is the intermediary?

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Expert Solution

1. The process by which financial market will be operating to transfer the funds from savers to borrowers is known as financial intermediation and they will be acting as financial intermediaries like banks as well as other saving organisations and depositories which will be channelizing the resources of savers to the borrowers and they will be trying to earn a commission and they will ensure proper liquidy into the system and they will also ensure proper credit availability. Savers will be trying to invest their money to the financial intermediaries in order to make a rate of return whereas borrowers will be trying to take loans from this financial intermediaries and pay them with interest

2. Yes, financial intermediaries in this case when the funds are transferred from savers to borrowers are mostly banks and Financial institutions who are taking the money from the savers and depositing it as when the borrowers are asking from the financial intermediaries for the loan, they are providing with the loan to borrowers.

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