Describe the ways in which capital can be transferred from suppliers of capital to those who are demanding capital. Solution The capital can flow from those who supply capital (lender) to those who demand it (borrower). This transfer of capital can take place in three different ways: 1. Direct transfer: In this case the borrower sells the stocks or bonds directly to the lender, without going through any type of financial institution. 2. Investment bank: An underwriter which facilitates the issuance of securities. The borrower sells its stocks or bonds to the investment bank, which in turn sells these same securities to the lender. 3. Other financial intermediary: In this case the intermediary obtains funds from the lender in exchange for its own securities. The intermediary uses this money to buy and hold businesses\' securities from the borrower in the market. Intermediaries create pool of capital. .

1. Describe the ways in which capital can be transferred from suppliers of capital to those who are
demanding capital.
Solution
The capital can flow from those who supply capital (lender) to those who demand it (borrower).
This transfer of capital can take place in three different ways:
1. Direct transfer: In this case the borrower sells the stocks or bonds directly to the lender,
without going through any type of financial institution.
2. Investment bank: An underwriter which facilitates the issuance of securities. The borrower
sells its stocks or bonds to the investment bank, which in turn sells these same securities to the
lender.
3. Other financial intermediary: In this case the intermediary obtains funds from the lender in
exchange for its own securities. The intermediary uses this money to buy and hold businesses'
securities from the borrower in the market. Intermediaries create pool of capital.