A financial intermediary is an institution that:

Question

Quizplus · Accepted Answer

A financial intermediary takes deposits from savers and lends those funds to borrowers. It raises the capital to lend by issuing liabilities against itself, such as deposits or bonds, rather than issuing equity or selling shares in itself. Option A is incorrect because financial intermediaries do not typically issue equity. Option C is incorrect because issuing shares and selling them to investors is typically done by companies that are seeking to raise capital, rather than financial intermediaries. Option D is incorrect because financial intermediaries do play a critical role in financial markets by facilitating the flow of funds between savers and borrowers.

A Financial Intermediary Is an Institution That