Individuals May Find It More Advantageous to Purchase Claims from a Financial

question 20

Multiple Choice

Individuals may find it more advantageous to purchase claims from a financial intermediary rather than directly purchasing claims in capital markets because
I.intermediaries are better diversified than most individuals
II.intermediaries can exploit economies of scale in investing that individual investors cannot
III.intermediated investments usually offer higher rates of return than direct capital market claims

• A) I only
• B) I and II only
• C) II and III only
• D) I, II and III

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Definitions:

Annual Bond Interest

The total interest that will be earned on a bond over the course of a year.

Face Value

The nominal or principal value of a financial instrument as stated by the issuer, typically used for bonds or currency notes.

Interest Expense

The cost incurred by an entity for borrowed funds, represented as an expense on the income statement.

Market Rate

The current price or interest rate at which securities, commodities, or currencies can be bought or sold in a marketplace.