Which of the Following Statements Is Most Correct

question 21

Multiple Choice

Which of the following statements is most correct?

• A) Financial intermediaries are banks.
• B) A bank is a financial intermediary.
• C) Financial intermediaries are insurance companies.
• D) Financial intermediaries are essential to direct finance.

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Definitions:

Net Present Value

A method used to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and outflows over a period of time.

Rate of Return

The increase or decrease in value of an investment for a set duration, shown as a percentage of the original investment amount.

Present Value Factors

The numerical factors used in calculating the present value of future cash flows, based on a specific discount rate and time period.

Sunk Costs

Costs that have been incurred in the past, cannot be recouped, and are not relevant to future decisions.