Which of the following can be described as involving indirect finance?
A)You make a loan to your neighbor.
B)You buy shares in a mutual fund.
C)You buy a U.S. Treasury bill from the U.S. Treasury at Treasury Direct.gov.
D)You purchase shares in an initial public offering by a corporation in the primary market.

Question

Quizplus · Accepted Answer

Indirect finance involves the use of a financial intermediary to channel funds from savers to borrowers. Buying shares in a mutual fund involves indirect finance as the fund pools money from many investors and then invests that money in a variety of assets.

Option A involves direct finance as the borrower and lender are directly involved. Option C involves purchasing a security issued by the government rather than through an intermediary. Option D involves taking part in the primary market by purchasing shares directly from the issuing corporation rather than through an intermediary.

Which of the Following Can Be Described as Involving Indirect