In the investment process, financial intermediaries are considered to be the key. What exactly is their function?

Question

A bond can be structured as an IOU of a corporation or government. When buying a bond, one is effectively facilitating a loan in lieu of a promised payment at a future date. As with all investments, bonds have three principle features, namely coupon (the interest) rate, a maturity date and par value on attractive pay offs.

Answer 1

Financial intermediaries are the institutions that channel funds between savers and borrowers. These comprise of banks, mutual funds, hedge funds, as well as pension funds. These intermediaries consolidate many individuals’ savings and allocate these funds to different financial assets, thus easing the investment process.