In contrast to individual investors, financial intermediaries will be willing to make longer term loans, and at a lower cost to borrowers, because:

Question

Quizplus · Accepted Answer

Financial intermediaries, such as banks, can afford to make longer-term loans at lower costs because they operate on the principle of pooling deposits from many investors. This allows them to manage liquidity and risk more effectively than individual investors, who might need access to their funds and are more risk-averse. They count on new and existing deposits to provide the necessary funds over the term of the loan, spreading the risk and ensuring liquidity.

In Contrast to Individual Investors, Financial Intermediaries Will Be Willing