Question

Which of the following is FALSE? A Financial intermediaries exist to reduce frictions in financial transactions. B Investment banks mainly collect deposits and make loans. C Brokers execute trades on behalf of investors. D Investment managers buy securities on behalf of investors.

Answer 1

Answer:

False statement is:

B Investment banks mainly collect deposits and make loans.

Explanation:

Investment banks act as an intermediary between its two kind of customers, which are corporate and individual customers.

They help individual customers to submit initial public offer, and investing in shares issued by corporate firms.

Thus, on one end their client is corporate firm and on the other hand their client is individual.

Thus, it do not invest by providing loans to their customers.

Therefore, Statement B is False.

B Investment banks mainly collect deposits and make loans.