Why Do Households Prefer to Use FIs as Intermediaries to Invest

question 76

Multiple Choice

Why do households prefer to use FIs as intermediaries to invest their surplus funds?

• A)Transaction costs are low to the household since FIs are more efficient in monitoring and gathering investment information.
• B)To receive the benefits of diversification that households may not be able to achieve on their own.
• C)The FI has can benefit from combining funds and negotiating lower asset prices and transactions costs.
• D)The FI can provide insurance at relatively low cost that will protect funds under management.
• E)All of these.

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Definitions:

Articles of Confederation

The original constitution of the United States, ratified in 1781, which was replaced by the US Constitution in 1789.

Military Powers

The authorities and capabilities vested in a country's armed forces for defense, conflict resolution, and enforcement of national or international mandates.

Executive

refers to the branch of government responsible for implementing and enforcing laws, typically headed by a president or prime minister.

Unanimous Agreement

A consensus where all parties involved fully agree on a decision or statement without opposition.