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One of the reasons that financial intermediaries exist is that -it is illegal for net lenders...

One of the reasons that financial intermediaries exist is that

-it is illegal for net lenders to lend directly to net borrowers

-vaults at financial intermediaries are safer for your money than your mattress or piggy bank

- there is no system for net lenders to lend directly to net borrowers

-financial intermediaries are better equipped to assess risk and to diversify portfolios

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Answer #1

Financial intermediaries acts as the facilitator of financial transaction between two parties.

For example, a bank acts as financial intermediary in the sense that it facilitates the flow of savings from depositors to the businesses as loan. In this way, it brings together lender and borrower.

Financial intermediaries have access to much larger information than the average person and due to this they are better equipped to assess rick and to diversify portfolios.

Hence, the correct answer is the option (4) [financial intermediaries are better equipped to assess risk and to diversify portfolios].

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