Individuals may find it more advantageous to purchase claims from a financial intermediary rather than directly purchasing claims in capital markets because:
I. Intermediaries are better diversified than most individuals.
II. Intermediaries can exploit economies of scale in investing that individual investors cannot.
III. Intermediated investments usually offer higher rates of return than direct capital market claims.

Question

Quizplus · Accepted Answer

Financial intermediaries are better diversified because they deal with multiple clients and can spread their risks over a larger pool of investments. They can also exploit economies of scale in investing, which can reduce trading costs and increase returns. However, intermediated investments may not necessarily offer higher rates of return than direct capital market claims.

Individuals May Find It More Advantageous to Purchase Claims from a Financial