Question

Which of the following is an example of financial intermediation? a. John buys shares of stock issued by a fast food company. b. A foreign government buys bonds issued by the U.S. Treasury. c. Susan makes a deposit at a bank and the bank uses this money to make an auto loan to Ferguson. d. None of the above is correct.

Answer 1

Answer:

Susan makes a deposit at a bank and the bank uses this money to make an auto loan to Ferguson.

Explanation:

Financial intermediary is the individual or an institution which serves as the middleman among the diverse parties which are different in order to ease or facilitate the financial transactions. Commercial banks, stockbrokers are few examples.

Out of the given options, the correct option which represents the example of financial intermediary is Option C. As mentioned above, banks are example of financial intermediary where it takes money from Susan as her/his deposits and generates a auto loan to the Ferguson.