Financial Intermediation Refers to a Process in Which a Financial

question 103

True/False

Financial intermediation refers to a process in which a financial institution buys stocks and bonds on behalf of investors who then have a claim on that institution rather than ownership of the securities themselves.

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Definitions:

Risk-averse

The tendency of individuals to prefer certainty over uncertainty, valuing predictable outcomes over those that are uncertain.

Auto Insurance

A policy purchased by vehicle owners to mitigate costs associated with getting into an auto accident, covering liabilities such as injury and property damage.

Expected Utility

The anticipated satisfaction or benefit received from an outcome, weighted by the probability of different outcomes occurring.

Risk-averse

The preference to avoid risks, favoring safer outcomes over potentially higher but uncertain returns.