Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Just sign up for free and you're in → Illustration

Q19I.

Expert-verified
Essentials Of Investments
Found in: Page 24
Essentials Of Investments

Essentials Of Investments

Book edition 9th
Author(s) Zvi Bodie, Alex Kane, Alan Marcus, Alan J. Marcus
Pages 748 pages
ISBN 9780078034695

Short Answer

Give an example of three financial intermediaries, and explain how they act as a bridge between small investors and large capital markets or corporations.

Financial Intermediaries: Commercial banks, Mutual Funds and Pension funds

Commercial banks- Accept deposits and offer loans

Mutual Funds - Accept funds from small investors and pool these funds to invest in the security market

Pension Funds -Accept funds in the form of small but regular contribution

See the step by step solution

Step by Step Solution

Definition

Capital Market is the place where buyers and sellers trade their financial securities while those financial institutions who stand between the security issuing firm and the ultimate owner of the security that is the individual investor are known as financial intermediaries.

Explanation

Commercial banks, Mutual Funds and Pension funds are three examples of financial intermediaries:

Commercial Banks: They represent the largest sectors of financial intermediaries. They accept deposits from customers and offer these as loans on specified interest to businesses.

Mutual Funds: They accept funds from small investors and pool these funds to invest in the security market. They invest these funds on behalf of the current employees or future retirees thereby channelizing transfer of funds from one sector to another.

Pension Funds: They accept funds in the form of small but regular contribution from small investors/employees.

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.