Question

intermediaries, including depository insthuions such as commercial banks and savings insttutions, insurance companies, mutual funds, and pension funds, transfer funds from uitimate lenders (savers) tor uhimate borrowers Firandial ietermediaries specialize in tecking problems of problem by carefuly reviewing the crede worthiness of loan applicants, and they deal with the protiem by monitoring bomowers aher they receive loans Many financial intemedaes also take advantage of cost reductions anaing from the centralized management of funds pooled from the ieformaon They address the savings of may individuas

Answer 1

Financial intermediaries including depository institutions such as commercial banks and savings institutions , insurance companies , mutual funds and pension funds , transfer funds from ultimate lenders (savers) to ultimate borrowers.

Financial intermediaries specialize in tackling problems of asymmetric information. They address the adverse selection problem by carefully reviewing the credit worthiness of loan applicants, and they deal with the moral hazard problem by monitoring borrowers after they receive loans. Many financial intermediaries also take advantage of cost reductions arising from the centralized management of funds pooled from the savings of many individuals.