A financial intermediary is an institution that:

Question

Quizplus · Accepted Answer

A financial intermediary serves as a middleman between borrowers and lenders. They borrow funds from depositors and lend these funds to borrowers, generating revenue from the difference between the interest rates. In order to gather funds from depositors, financial intermediaries issue liabilities against themselves, such as certificates of deposit or savings accounts. Therefore, option B is the correct answer. Option A is incorrect because financial intermediaries do not issue equity themselves. Option C is incorrect because issuing stocks and selling shares would make the financial institution a corporation, not necessarily a financial intermediary. Option D is incorrect because financial intermediaries do exist and serve a crucial role in the financial system.

A Financial Intermediary Is an Institution That