Financial intermediaries:

Question

Quizplus · Accepted Answer

Financial intermediaries like banks, mutual funds, and insurance companies facilitate indirect transfers of funds from investors to firms. They take in deposits or investments from individual investors and then lend or invest those funds in businesses or other investment opportunities. This allows investors to diversify their portfolios without having to directly manage their investments, while also providing firms with access to a larger pool of potential funding. Pass-through securities are a specific type of investment that can be traded among investors without the need for intermediaries, but this is not the primary role of financial intermediaries. Stockbrokers are intermediaries in the sense that they facilitate trades between investors, but they do not provide the same level of financial intermediation services as banks and other financial institutions. Finally, while direct transfers from investors to firms can occur in some cases, they are relatively rare and are typically only feasible for large institutional investors or wealthy individuals.

Financial Intermediaries