Determine whether each of the following is direct financing or indirect financing.(2 points)

Question

taking out a loan at a commercial bank

Direct Financing

Indirect Financing
selling stock on the stock market

Direct Financing

Indirect Financing
investing in a friend's new business

Direct Financing

Indirect Financing
investing in a mutual fund

Direct Financing

Indirect Financing
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Answer 1

Here are the classifications for each of the financing options you provided:

1. Taking out a loan at a commercial bank

   • Indirect Financing
     (The bank acts as an intermediary between lenders and borrowers.)

2. Selling stock on the stock market

   • Direct Financing
     (The company raises capital directly from investors who buy shares.)

3. Investing in a friend's new business

   • Direct Financing
     (You are providing capital directly to your friend's business without any intermediary.)

4. Investing in a mutual fund

   • Indirect Financing
     (The mutual fund pools money from many investors and invests it in various securities, acting as an intermediary.)