Financial intermediaries could address the liquidity costs associated with investments better than individual households, because agglomerating funds of individual households helps FIs:

Select one:

a. To diversify their source of funds and better predict withdrawal of funds by investors.

b. To reduce costs of information collection and better monitor the management of invested firms.

c. To invest in many firms and better diversify away firm-specific risks.

d. To achieve economy of scale and reduce the transaction costs.

e. To better perform the broker function.