Question

question 21
which of the following can be described as involving indirect finance?
○ you buy a u.s. treasury bill from the u.s. treasury at treasury direct.gov.
○ you make a loan to your neighbor.
○ you buy shares in a mutual fund.
○ you purchase shares in an initial public offering by a corporation in the primary market.

Explanation:

Indirect finance involves a financial intermediary (like a mutual fund) between savers and borrowers.

• Buying a Treasury bill directly from the Treasury is direct finance (no intermediary).
• Lending to a neighbor is direct (no intermediary).
• Buying mutual fund shares: The mutual fund acts as an intermediary, pooling funds to invest in various assets, so this is indirect finance.
• Buying shares in an IPO directly from the corporation is direct finance (no intermediary between you and the corporation).

Answer:

C. You buy shares in a mutual fund.