Which of the following can be described as direct finance?
A)You take out a mortgage from your local bank.
B)You borrow $2,500 from a friend.
C)You buy shares of common stock in the secondary market.
D)You buy shares in a mutual fund.

Question

Quizplus · Accepted Answer

Direct finance occurs when borrowers directly borrow funds from financial markets or individuals without using a financial intermediary like a bank, mutual fund, or other institution. Borrowing $2,500 from a friend is an example of direct finance because it involves a direct financial transaction between two individuals without an intermediary.

Which of the Following Can Be Described as Direct Finance