Financial intermediaries play the basic role of transforming financial assets that are less desirable for a large part of the public into other financial assets (their own liabilities) which are more widely preferred by the public. This transformation involves at least one of four economic functions. Which of the below is NOT one of these functions?

Question

Quizplus · Accepted Answer

Financial intermediaries aim to reduce risk via diversification, not enhance it. The other three functions listed are correct, as financial intermediaries provide maturity intermediation, reduce contract and information processing costs, and provide a payments mechanism.

Financial Intermediaries Play the Basic Role of Transforming Financial Assets