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Give an example of three financial intermediaries and explain how they act as a bridge between small investors and large capital markets or corporations?
Javy1272
- Banks, investment companies, insurance companies and credit unions - Households want desirable investments for their savings, yet the small size of most households makes direct investment difficult. They don't advertize to lend money to businesses and are not equipped to analyze the credit risk of borrowers - For these reasons, financial intermediaries have evolved to bring lenders and borrowers together. i.e. A bank raises funds by borrowing (taking deposits) and lending that money to other borrowers. The sprad between the interest rates paid to depositors and the rates charged to borrowers in the source of the bank's profit. In this way, lenders and borrowers do not need to contact each other directly.
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What is the difference between financial intermediaries and non financial intermediaries?
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What do financial intermediaries do?
I have to separate it into to parts. The financial intermedairies which are banks that borrow their customers money and pay interest on that borrowed money to lend to other customers with the plan of making a return on their investments for them and their customers. Domestic to me would be the personal home needs such as, a individual (not business) that is looking for a depository institution where he or she can gain interest on the deposited funds or for a bank to finance them so they can purchase a home, car, etc. I am still researching, but this is what I understand of what I have already researched. Of course I am a student, not an educator, so this is just my opinion.
Can you describe the three ways capital is transferred between savers and borrowers?
Direct Transfer, Primary Market Transaction and Financial Intermediaries.
What is the relationship between securitizatioln and the role of financial intermediaries inthe economy. What happen to financial intermediaries as securitization progresses?
- Securitization changes the basic role of financial intermediaries. Traditionally, financial intermediaries have pooled funds from investors loaned to firms in their place. - Securitization has enabled firms to offer these functions in the form of a security, in which case, the focus shifts to the more essential function i.e. distributing a financial product. (For example, in the above case, the bank, being the earlier intermediary, was eliminated, and instead the services of an investment banker were sought to distribute a debenture issue.) - Securitization seeks to eliminate fund based financial intermediaries for fee based distributors. (In the above example, the bank was a fund based intermediary, a reservoir of funds, whereas the investment banker was a fee based intermediary, a catalyst, a pipeline of funds. Hence, with the increasing trend towards securitization, the role of fee based financial services has been brought into the focus.) - In case of a direct loan, the lending bank was performing several intermediation functions as noted above. It was distributor, in the sense that it raised its own finances from a large number of small investors. It was appraising and assessing the credit risks in extending the corporate loan, and having extended it, it was managing the same. - Securitization splits each of these intermediary functions apart, each to be performed by separate specialized agencies. The distribution function will be performed by the investment bank, appraisal function by a credit rating agency, and management function, possibly by a mutual fund which manages the portfolio of security investments by the investors. Hence, securitization replaces fund based services with several fee based services. This is mainly from http://www.citeman.com/5298-securitization-capital-markets-structured-financial-and-others/
What kind of service does the financial ombudsman have to offer?
A financial ombudsman aids in the settlement of complaints between consumers and businesses that provide finance related services. An example of this would be the settling of complaints between banks and their investors.
Difference bewtween depost taking institutuins and non deposit taking institutions?
Actually i want see the deiffence between these two financial institutions as intermediaries. Thanks Dan
Why is a commercial bank considered a financial intermediary?
This is because it acts as an 'middleman' between investors and the firms raising the funds. In simple banking model, it is a link between depositors and borrowers.
What is the Meaning Of Financial intermediary?
A financial intermediary is an organization that raises money from investors and provides financing for organizations (individuals, corporations, etc). It serve as a middle man between saving and financing. Financial intermediaries are an important source of financing for corporations. The following details five classes of financial intermediaries :Mutual Fund: a managed investment fund that pools the savings of many investors and invests in a portfolio of securities; are actively managed to generate superior performance, selecting stocks with returns "above average"Exchange-traded Fund: an investment fund that is traded on the stock exchange, that pool savings of many investors and invests in securities to match the performance of the securities index; are passively managed indexed funds - what this means is that securities are chosen such that it replicates the performance of a chosen market indexHedge Funds: an investment fund that pools savings from investors and then invests in a portfolio of securities; unlike mutual funds, they have alternative investment strategies such as taking out both short and long term positions in stock through a variety of financial instrument (such as options, futures and bond) to capitalize on market conditions; are typically more costly and risky to invest inPrivate Equity Funds: an investment fund focused on investing in equity of privately own business (not publically traded on a stock market); provides financing and stability for troubled/developing companies; (i.e. venture capital, angel investing, etc)Pension Funds: an investment plan set up by an organization for its employees' retirement - pool the company's money and invests in securities; designed as a long term investment; diversified, with tax benefits (deductible and not taxed until claimed)Information summarized from McGraw-Hill Ryerson - Fundamentals of Corporate Finance 4 Edition
What are examples of a intermediaries?
business that acts as a go between between in moving goods from producers to consumers.
What are the role of financial intermediaries in financial system?
Financial System Perform the same role by channelizing funds between savers and borrowers in the economy as blood circulation in human body by heart through veins.which keep alive to thenerves and mankind to make active creative and energize. the system serve to individuals, organizations, and whole nation to make their active participation for productivity.
A basic difference between managerial accounting and financial accounting is that managerial accounting?
One basic difference between managerial accounting and financial accounting is that managerial accounting is used internally instead of externally for investors. Managers use managerial accounting to determine what level of output is appropriate for their departments.
What is the relationship between financial 'system' 'instrument' 'market' and 'institution'?
Financial markets Financial markets are forums and sets of rules that allow participants to conduct investment, financial, and hedging operations via different intermediaries, through the trading of various financial instruments. The financial system seeks the efficient allocation of resources among savers and borrowers. A healthy financial system requires, among other things, efficient and solvent financial intermediaries, efficient and deep markets, and a legal framework that defines clearly the rights and obligations of all agents involved. financial instrumentAn instrument having monetary value or recording a monetary transaction.a financial institution acts as an agent that provides financial services for its clients or members. Financial institutions generally fall under financial regulation from a government authority. Common types of financial institutions include banks, building societies, credit unions, stock brokerages, asset management firms, and similar businesses.
