As per your request, answers to problems from chapter 13. FIs provide services that help reduce the risks and costs associated with borrowing, lending, and their financial transactions. FIs also help fulfill the demand for various Financial assets and services, including protection against the financial losses associated with various exigencies. FIs provide these services because they are profit-seeking Firms. A contingent Financial claim is a claim such as casualty and life insurance benefits that offer the public protection from the often-catastrophic Financial effects of theft, accidents, natural disasters, and death.
Financial intermediation helps reduce the risks associated with lending and borrowing money.
Given the relative safety that FIs offer, SSUs don t have to give up as much safety for higher returns, and in turn, the reduction in risks will afford lower rates for DSUs. FIs are like other firms in that they too are profit seeking. Also, FIs are Firms producing services just as nonfinancial firms in the economy produce goods. FIs are similar in that they are profit-seeking firms that link up DSUs and SSUs and in the process, provide the public with a wide range of financial services. The differences among FIs manifest themselves in the financial services they specialize in and the composition of their balance sheets.