Questions: Which of the following is an example of direct finance? (1 point) A small business opens a line of credit from a commercial bank. A company sells its stocks to investors. An individual deposits funds into a savings account at his credit union. An individual applies for a mortgage through a mortgage bank.

The answer is B: A company sells its stocks to investors.

Explanation for each option:

A. A small business opens a line of credit from a commercial bank.

• This is an example of indirect finance. The small business is obtaining funds through a financial intermediary (the commercial bank), which is characteristic of indirect finance.

B. A company sells its stocks to investors.

• This is an example of direct finance. The company is directly obtaining funds from investors by selling its stocks, without the involvement of a financial intermediary.

C. An individual deposits funds into a savings account at his credit union.

• This is an example of indirect finance. The individual is depositing money into a financial institution (the credit union), which then uses those funds to make loans or investments.

D. An individual applies for a mortgage through a mortgage bank.

• This is also an example of indirect finance. The individual is obtaining a loan through a financial intermediary (the mortgage bank), which is typical of indirect finance.