Asked by Raymond Pittman on Jun 29, 2024
Verified
Financial intermediaries exist because small investors cannot efficiently ________.
A) diversify their portfolios
B) gather information
C) assess and monitor the credit risk of borrowers
D) all of the options
Financial Intermediaries
Institutions that act as middlemen between savers and borrowers, facilitating the flow of funds in the financial system.
Diversify Their Portfolios
The strategy of spreading investments among various financial instruments, industries, and other categories to minimize risk.
Credit Risk
The potential that a borrower will fail to meet their obligations in accordance with agreed terms.
- Understand the role and functions of financial intermediaries.
Verified Answer
JM
Jasmine MaquirangJul 05, 2024
Final Answer :
D
Explanation :
Financial intermediaries exist to perform various functions such as pooling funds, diversifying portfolios, gathering information on potential borrowers, assessing and monitoring credit risk, and providing liquidity. Small investors often lack the resources and expertise to perform these functions efficiently, hence the need for financial intermediaries. Therefore, all the options presented (A, B, and C) are reasons why financial intermediaries exist.
Learning Objectives
- Understand the role and functions of financial intermediaries.