Describe the role that financial intermediaries play in the financial markets and explain why there are...

Describe the role that financial intermediaries play in the financial markets and explain why there are so many different types of intermediaries.

Solutions

Expert Solution

Financial intermediaries bring sources of funds to user who would like to avail the funds. They play a very important role in bringing the idle sitting funds to the people requiring it and thus increasing effeciency and contributing to the economic growth. In other words they facilitate the differeing needs of lenders and borrowers. They help in a way that borrowers rather than going to individual lenders go to a financial intermediaries in order to acquire funds needed. Since they specialize in this, they offer competitive rates and take care of repaying abilities of the borrowers. They provide a low search cost and spread risk between different borrowers. They also thus provide economies of scale and convinience of amounts to a large extent.

There are various types of financial intermediaries, Banks, insurance companies, Fianncial advisors, Credit union, Investment trusts etc. They are present to cater to different fund needs. For example a firm if requires loan will go to a bank however an individual requiring insurance will go to an insurance company because his requirement of funds is different. Each type of intermediary caters to differing needs.

jeff jeffy answered 5 months ago

Next > < Previous

Related Solutions

2. Explain why stocks are better suited for financial markets than financial intermediaries. 3. Give an...

2. Explain why stocks are better suited for financial markets than financial intermediaries. 3. Give an example of a transaction that goes from the supplier to capital to the financial intermediary to the financial markets to the demander of capital. 4. Give an example of a money market security and capital market security.

A bank is an example of a financial intermediary. Explain the role of financial intermediaries and...

A bank is an example of a financial intermediary. Explain the role of financial intermediaries and their usefulness to the private investor ( At least 500 words)

Briefly discuss why it is necessary to have financial markets and financial intermediaries. (Hint: base your...

Briefly discuss why it is necessary to have financial markets and financial intermediaries. (Hint: base your answer on what we have discussed in class)

What are financial intermediaries? What do they play in the economy?

Briefly explain why markets and intermediaries are fundamental for a well-functioning economy? (answer must be at...

Briefly explain why markets and intermediaries are fundamental for a well-functioning economy? (answer must be at least 300 words)

I.Financial Intermediaries: Briefly describe each of the following financial intermediaries in terms of the way they...

I.Financial Intermediaries: Briefly describe each of the following financial intermediaries in terms of the way they help issuers raise capital: Commercial Bank: Lending and deposit- taking; also expanded into investment advisory/trust services. Investment Bank: Handle securities issuance, merger/acquisition and reorganization advisory services. Financial Services Company: Includes broker/dealers, investment advisory firms. B. In what ways do efficient capital markets help both issuersand investors? II Capital Raising by Corporations: Identifyand describetwo typesof securities corporationsmay issue in order to raise capital. Is an initial...

What crucial role do financial intermediaries perform in an economy?

Argue on the following questions: What role do financial markets play in our economy and what...

Argue on the following questions: What role do financial markets play in our economy and what is the relationship between financial institutions and financial markets? Establishes the importance of financial markets in the economy. He mentions the financial institutions that regulate the way of doing business in the United States. Establishes a relationship between institutions and financial markets.

The financial system is financial markets and financial intermediaries through which firms acquire funds from households....

The financial system is financial markets and financial intermediaries through which firms acquire funds from households. Which of the following are advantages the financial system offers for households? Question 1 options: Consumption goods. Household services. The elimination of risk. Liquidity. Information. Risk-sharing.

Discuss at least four major macro benefits of having financial intermediaries in globalized financial markets.

Subjects