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In a well-functioning economy, capital will flow efficiently from those who supply capital to those who...

In a well-functioning economy, capital will flow efficiently from those who supply capital to those who demand it. This transfer of capital can take place in three different ways. Discuss these three different ways

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Expert Solution

Three ways in which capital can be transferred as follows-

A. Direct transfer of money and securities occur when a business will be selling its stock and Bond directly to the saver without going through any type of financial institution.

B. Transfers can be made through financial intermediary and the intermediary will be issuing funds from savers in exchange of the securities and intermediary & intermediary will be using this money to buy and hold business securities and they will be creating new form of capital.

C. Transfers can also go through investment banking house which will be underwriting the issue and investment underwriter will be serving as a middleman and facilitate the issuance of the securities of the company.Company will be selling stocks to the investment bank and it will be selling the stocks to the savers and the business securities and the savers money pass through investment banking house to the company

jeff jeffy answered 1 year ago
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