Unit 1.2

Question 1

what is Financial Intermediary ?

Answer 1

An institution or individual that acts as a middle man between lenders and borrowers

Question 2

surplus

Answer 2

Have money then they need/wish to have. The value of the funds will increase, and a profit will be made.

Question 3

deflict

Answer 3

borrows the money form the surplus and pays interest back

Question 4

what is it called when the surplus and deflect party’s just find each over and skip out the middleman ?

Answer 4

Disintermediation

Question 5

Intermedium

Answer 5

A individual that acts as a bridge between two parties in a transaction or process

Question 6

Graphic location

Answer 6

Where the lender may be from one location and only know local borrowers and the borrowers live in another location and also only know local lenders. So this is where the financial industry brings together the lender and borrower.

Question 7

Aggregation

Answer 7

This is about saving small amounts of money that add up to create a bigger sum that can then be lent out to borrowers.

Question 8

the point if Aggregation…

Answer 8

Even if a potential borrower can find a lender, they may not have enough money to meet there needs.

Question 9

Maturity Transformation

Answer 9

Depositors expect to have quick access to their money, but borrowers need longer-term financing.Maturity transformation bridges this gap by allowing lenders to earn interest on their deposits while borrowers can access long-term capital.

Question 10

Risk transformation

Answer 10

When people deposit their money, they may be worried about lending the money to borrowers as there is a chance they may not pay it back or could be fraud

Question 11

how does intermediary help risk transformation?

Answer 11

Banks and financial services spread out this risk by lending the money to many different borrowers instead of just one. If a few borrowers fail to repay the bank is still covered because lots of other loans are being re-paid in the time being

Question 12

what would be the used example of risk transformation?

Answer 12

If you had £1000 to lend you could lend £10 to 10 different borrowers, this would mean if one of them did not pay the money back that the remaining of the borrowers are still repaying

Question 13

what are the 4 stages of intermediatory?

Answer 13

-Geographic location
-aggregation
-maturity transformation
-risk transformation

Question 14

product sales intermediaries

Answer 14

The intermediation that brings together product providers and potential customers who wish to buy products/service

Question 15

how would the loss of money be minimized?

Answer 15

spreading out the risk