Question

Which of the following is an example of direct finance?

	A.	A depositor opening an account at their local bank.
	B.	An investor calling up their broker and purchasing a bond.
	C.	A large corporation taking out a loan at a regional bank.
	D.	An investor purchasing a mutual fund.
	E.	A small business women taking out a loan at her local bank.

Answer 1

When borrower directly borrows the money from lender without any financial intermediary then in such case it is termed as direct finance.

For example, a firm issues a bond and a household purchases that bond. So, firm (borrower) is directly borrowing the money from household (lender) through the selling of bond. This is a direct finance scenario.

So,

The example of direct finance is an investor calling up their broker and purchasing a bond.

Hence, the correct answer is the option (B).