Question

Which of the following is an example of financial​ intermediation? A. A saver makes a deposit in a credit​ union, and the credit union makes a loan to a member for a new car. B. U.S. Treasury sells bonds to fund government spending. C. IBM issues a bond that is sold to a retired person. D. IBM issues common stock that is sold to a college student.

Answer 1

Answer:

A. A saver makes a deposit in a credit​ union, and the credit union makes a loan to a member for a new car.

Explanation:

A financial intermediation is when an institution acts as the joint-point between two parties in a financial transaction. This means, lender and borrowers, and buyer and seller.

The saver deposit in the credit union. (lender)

And the financial intermediate give a loan to a member (borrower)

This spread the risk and makes transaction more easy, as both parties deal with the credit union, not with themselves.

The credit union faces and assumes obligation with both:

for the saver to give the deposit

and with the borrower that if it meets the requirement will receive the cash for the car and will return in  a pre-arrenged method with a given interest and time defined.