Why are banks able to offer funds more cheaply to many borrowers than can financial markets?
A)Banks tend to be willing to settle for lower profits than are other lenders.
B)Banks are less regulated than are financial markets, which lowers banks' costs of operating.
C)Banks specialize in gathering information on the creditworthiness of borrowers and monitoring borrowers' activities.
D)Financial markets are generally uninterested in making loans to small borrowers, because small borrowers usually cannot afford to pay the rates charged large corporations and other large borrowers.

Question

Quizplus · Accepted Answer

Banks have an advantage over financial markets in offering funds more cheaply to many borrowers because they have the ability to specialize in gathering information on the creditworthiness of borrowers and monitoring their activities. This allows banks to better assess and manage risk, leading to lower borrowing costs for customers. Financial markets, on the other hand, usually have less information about individual borrowers and face higher costs of managing risk, making it more expensive for them to offer funds to a broad range of borrowers.

Why Are Banks Able to Offer Funds More Cheaply to Many