Financial intermediaries frequently offer a variety of benefits to both the borrowers attempting to raise capital in the financial markets and the economies that allow them to function.

Read the following statements. Then, identify the benefits or services that may be provided by a financial intermediary. Check all that apply.

Financial intermediaries have the marketing staff with which to resell the borrowers$$ debt or equity securities to interested savers $($lenders or investors$).$

Financial intermediaries raise the net cost of borrowing by requiring additional borrower$-$identification costs and reduce the return that can be earned by savers.

Since financial intermediaries separate the borrowing and the savings activities, they eliminate the need for a simultaneous desire to save and borrow between the two parties involved in either a direct transfer or an indirect transfer made via a middleman.

Financial intermediaries tend to offer a variety of related financial services, which reduces the overall financial costs to their customers.

Scenario

Direct Transfer

Transfer through an Investment Banking House

Transfer through a Financial Intermediary

Two years ago, Zachary started a new business. Now he needs additional capital to finance additional growth and is meeting with a group of $$angel$$ investors. If they decide to make the loan, they will do so directly, without the use of a middleman or other intermediary.

Edinborough Exports, Inc. would like to borrow additional debt capital. The firm has hired a firm to assist in the sale of a new issue of $10-$year bonds.

Seattle Seafood Company holds cash balances in an institution that, in turn, loans out the funds to other individuals and companies.