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Types of Financial Intermediaries

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Questions and Answers

What is the main role of brokers in the financial system?

Providing investment advice to corporate clients
Trading directly with clients
Arranging initial public offerings
Finding traders willing to take the other side of their clients' orders (correct)

Why are large orders hard to fill according to the text?

Because brokers are not interested in handling large orders
Because large orders generally trade at a discount to the current market price
Because large traders are unwilling to expose their orders to the public
Because large orders generally trade at a premium to the current market price (correct)

In what way do exchanges act as brokers according to the text?

By directly negotiating trades between traders
By providing investment advice
By specializing in mergers and acquisitions
By arranging trades based on orders submitted by brokers and dealers (correct)

What is a primary function of investment banks' corporate finance divisions?

Helping companies finance their business through issuing securities (B) Signup and view all the answers

What distinguishes block brokers from regular brokers?

Block brokers manage exposure of large orders carefully (A) Signup and view all the answers

Why are financial intermediaries essential to well-functioning financial systems?

To provide efficient solutions for clients' financial problems (A) Signup and view all the answers

What is the primary role of financial intermediaries?

To help entities achieve their financial goals by providing efficient solutions (B) Signup and view all the answers

How do financial intermediaries connect buyers to sellers?

By standing between buyers and sellers to help transfer capital and risk efficiently (B) Signup and view all the answers

What distinguishes financial intermediaries from traditional banks in terms of services provided?

Specializing in facilitating capital and risk transfer between buyers and sellers (D) Signup and view all the answers

How do financial intermediaries benefit buyers and sellers in financial markets?

By enabling trading without requiring direct knowledge of counterparty (B) Signup and view all the answers

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