Which of the following can be described as involving indirect finance?
A) You make a loan to your neighbor.
B) A corporation buys a share of common stock issued by another corporation in the primary market.
C) You buy a Canadian Treasury bill from the Bank of Canada.
D) You make a deposit at a bank.

Question

Quizplus · Accepted Answer

Indirect finance involves a financial intermediary between the saver and the borrower. When you make a deposit at a bank, the bank then uses those funds to make loans to others, which is a classic example of indirect finance. Choices A, B, and C involve direct finance, where financial assets are bought directly from the issuer or from another investor without the involvement of a financial intermediary.

Which of the Following Can Be Described as Involving Indirect