1-72 Why Do Households Prefer to Use FIs as Intermediaries

question 66

Multiple Choice

1-72 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 the above.

---

Definitions:

Prenegotiate

The process of discussing and agreeing on basic terms before entering into formal negotiations.

Negotiation Process

The systematic approach or series of steps taken by parties to come to an agreement or resolve a dispute.

Bargainers

Individuals or parties engaged in negotiations seeking to reach a mutual agreement.

Assumptions

Beliefs or premises taken for granted without requiring conclusive evidence.