Explore BrainMass

Explore BrainMass

    Financial Intermediary

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    a) Is an investment bank, while facilitating the issue of securities, acting as a financial intermediary? Explain.

    b) Is an insurance company a financial intermediary? Explain.

    c) The savings rate domestically has increased, probably due to uncertainty about the future (as a result of the recent economic downturn). All else equal, how should this affect market interest rates?

    © BrainMass Inc. brainmass.com December 24, 2021, 8:47 pm ad1c9bdddf
    https://brainmass.com/business/finance/financial-intermediary-313078

    SOLUTION This solution is FREE courtesy of BrainMass!

    Question A
    Financial intermediation involves the transfer of funds between suppliers and those who need them. Hence, investment banks also act as financial intermediaries in that they aid the issuer of the securities to secure the funds they need and investors in the selection of investment vehicles.

    Question B
    In this line the insurance company also acts as a financial intermediary. Those who have fund surplus pay their premiums to the insurance company and then the company channels those premiums to entities with funding requirements. The only difference is that an insurance company in exchange for the premiums provides insurance coverage.

    Question C
    Given that the savings rate has increased, this can potentially put a downward pressure on interest rates. This is so because the supply of money has increased while the demand for funds would, in the short run, stays the same. To maintain equilibrium interest rates must go down.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com December 24, 2021, 8:47 pm ad1c9bdddf>
    https://brainmass.com/business/finance/financial-intermediary-313078

    ADVERTISEMENT