When a large company issues a financial instrument into the financial markets:
A) funds flow indirectly from saver to borrower.
B) the cost of funds is generally higher owing to the risk involved.
C) it buys a financial claim.
D) it sells a financial claim.

Question

Quizplus · Accepted Answer

When a company issues a financial instrument, such as a bond or stock, it is selling a financial claim to investors in exchange for funds. Therefore, the correct answer is option D. Option A refers to the flow of funds from savers (investors) to borrowers (companies) in general, but it doesn't specifically address the process of issuing financial instruments. Option B is not necessarily true, as the cost of funds will depend on market conditions and the perceived risk of the issuing company. Option C is incorrect, as the company is not buying a financial claim but rather selling one.

When a Large Company Issues a Financial Instrument into the Financial