1 answer

Wha are the five functions of financial intermediaries are presented. List and briefly describe these five...

Question:

  1. Wha are the five functions of financial intermediaries are presented. List and briefly describe these five functions, and for each, give an example of a financial intermediary that does that function?

  1. Explain the two problems that asymmetric information causes for markets. What is an example of each of these two problems?

Answers

Function of financial intermediary are:

  • They provide liquidity to funds.
  • They reduce risk by diversifying investments.
  • They provide safekeeping for payments.
  • They pool individual funds together.
  • They collect aggregate information which helps in reducing asymmetric information.

Asymmetric information leads to moral hazard and adverse selection.

Adverse selection occurs when buyers or sellers in the market do not have the proper knowledge of the product which they are buying or selling. Assume you are buying a second hand car, only the user known the internal problem of the car. If you are able to identify them you will ask for less price otherwise you will extra money for nothing. If you pay extra and get a lemon car, there is inefficiency created due to less information with the buyer.

Moral hazard occurs when one party among the buyer or seller pose more burden on other. Assume the case of insurance companies where if consumer buys the insurance plans, they loose all the incentives to take care of their health as they know if something bad happens to their health, insurance companies will bear the cost.

This pose more burden on insurance market and creating inefficiency.

.

Similar Solved Questions

1 answer
What are the major differences between Medicare, Medicaid, and CHIP? What is Medicare? Does the government...
What are the major differences between Medicare, Medicaid, and CHIP? What is Medicare? Does the government fund it completely? How is the funding for Medicaid and CHIP different from the funding for Medicare? What are the four parts of Medicare and what do they cover, in general? Most Americans pay ...
1 answer
Kindly do all parts with complete steps to get 100% feedback. Wherever there is some answer...
Kindly do all parts with complete steps to get 100% feedback. Wherever there is some answer written in brackets, it is correct so please get the same solution. If you can not get the same answers then please do mot attempt any of the part. 6. Light going through a lens will have diffraction effec...
1 answer
List two tasks that CNA's are permitted to perform,   List two tasks that CNA's are NOT permitted...
List two tasks that CNA's are permitted to perform,   List two tasks that CNA's are NOT permitted to perform...
1 answer
Which of the following best describes the effectiveness of health care? Select one: a. Fairness in...
Which of the following best describes the effectiveness of health care? Select one: a. Fairness in access to health care b. Achieving the greatest health benefits for the least cost c. The extent to which health care achieves what it is intended to d. Whether health care responds to the legitimate e...
1 answer
The Income Statement columns of the August 31 (year-end) work sheet for Ralley Company are shown...
The Income Statement columns of the August 31 (year-end) work sheet for Ralley Company are shown here. To save time and space, the expenses have been grouped together into two categories. INCOME STATEMENT ACCOUNT NAME DEBIT CREDIT Income Summary 32,000.00 31,000.00 Sales 324,000.00 ...
1 answer
2. Need four colligative properties of a solvent a. b. c. d.
2. Need four colligative properties of a solvent a. b. c. d....
1 answer
From Part A, look up the rules for solubility and determine if any of the results...
From Part A, look up the rules for solubility and determine if any of the results did not follow these rules. For any exceptions, indicate any sources of error. Part A 25 orunite ND3 Va SIGNATURE DATE WITNESS...
1 answer
Donald, A Wealthy Banker, Has A 24-year-old Son, Junior, That Has Struggled To Keep A Job....
Donald, A Wealthy Banker, Has A 24-year-old Son, Junior, That Has Struggled To Keep A Job. ... Your question has been answered Let us know if you got a helpful answer. Rate this answer Question: Donald, a wealthy banker, has a 24-year-old son, Junior, that has struggled to keep a job. In 201... Dona...
1 answer
Exercise 15-14 The stockholders’ equity accounts of Sunland Company have the following balances on December 31,...
Exercise 15-14 The stockholders’ equity accounts of Sunland Company have the following balances on December 31, 2020. Common stock, $10 par, 290,000 shares issued and outstanding $2,900,000 Paid-in capital in excess of par—common stock 1,120,000 Retained earnings 5,110,000 ...
1 answer
1) What does the appearance of a new band in a western blot mean? 2) When...
1) What does the appearance of a new band in a western blot mean? 2) When a band on a western blot increases in density over time, what does it mean? 3) When a band on a western blot decreases in density over time, what does it mean? 4) As it relates to EGF signaling, what process in the cell would ...
1 answer
What is the "monetary base?" 10 Multiple Choice 02:14:22 Skipped It is all the cash (the...
What is the "monetary base?" 10 Multiple Choice 02:14:22 Skipped It is all the cash (the green stuff) - it's that simple O It is all of the cash (the green stuff) + foreign bank reserves the Fed's gold reserves There is no such thing as the monetary base it is the total US money supp...
1 answer
Question 4 A sample of 1440 mountain climbers is taken and 1056 are college graduates Calculate...
Question 4 A sample of 1440 mountain climbers is taken and 1056 are college graduates Calculate the Upper Limit of the 99% confidence interval for the proportion of mountain climbers who are college graduates. Activate...
1 answer
How do you multiply #-\frac { 1} { 2} x ^ { 2} \cdot - 6x ^ { 3}#?
How do you multiply #-\frac { 1} { 2} x ^ { 2} \cdot - 6x ^ { 3}#?...
1 answer
Examine three ways you believe that social networks have “leveled the playing field” between major corporations...
Examine three ways you believe that social networks have “leveled the playing field” between major corporations and small businesses. Sports teams have adapted the practice of businesses using business analytics to make wiser decisions. Provide your opinion on teams that use sports analy...
1 answer
Q 3: ABC Ltd., took a contract in 2018 for construction of a contract for Rs....
Q 3: ABC Ltd., took a contract in 2018 for construction of a contract for Rs. 500,000 estimation that the cost would be Rs. 460,000. At the end of the 2018, the company had received Rs. 180,000 being 90% of the work certified. Certain work not yet certified had cost of Rs. 5,000. Expenditures incurr...
1 answer
Question 33 Predict the product for the following reaction sequence. NaBH4/CH3OH AICI: ОН OCH3 IV V...
Question 33 Predict the product for the following reaction sequence. NaBH4/CH3OH AICI: ОН OCH3 IV V OH...
1 answer
Newton's Law of Gravitation states that two bodies with masses my and m2 attract each other...
Newton's Law of Gravitation states that two bodies with masses my and m2 attract each other with a force F, where r is the distance between the bodies and G is the gravitational constant. mim2 F=G 72 Use Newton's Law of Gravitation to compute the work W required to launch a 1900 kg satellite...
1 answer
Option #1: Inventory Entries Practice Exercises Below is a record of the purchases and sales of...
Option #1: Inventory Entries Practice Exercises Below is a record of the purchases and sales of inventory throughout the first four months: Units Cost/Price Per Unit 1/1/x7 Beginning Balance 100 $3.50 1/31/x7 Purchase 125 $4.00 2/15/x7 Purchase 250 $4.50 2/25/x7 Sa...