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Provide brief answers for the following questions: a. What is indirect lending? b. Explain how secondary...

Provide brief answers for the following questions:

a. What is indirect lending?

b. Explain how secondary markets help facilitate capital formation (investment in real assets).

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Answer #1

a) Indirect lending is done through intermediaries and loan supplier and loan taker don't share any relationship. The intermediaries manages risk and makes loan available . Dealers who sell cars request customers to go for indirect financing and don't have to bother about payments .However these indirect loans might have rate of interest.

b) Capital formation is the accumulation of assets like stock, equipment , machines ,etc. Secondary markets take deposits or money from savers or supplier of loans and provide them to the companies who utilize these loans for capital formation.

Please Discuss in case of Doubt

Best of Luck. God Bless
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