Provide an example of how a bank achieves lower cost in making a large loan to a company than could be achieved without the bank.

What will be an ideal response?

If a company needed to borrow a large amount, without a financial intermediary (bank) they would conceivably have to approach many individuals, borrowing small amounts from each. This would be costly not only in time but also each individual would require a separate contract and perhaps negotiate different interest rates. The bank can have a lawyer, who specializes in contracts, draw up one contract that is fairly complete and can be used for most loans. Since there is only one transaction only one contact is needed (less time) and only one contract at one price.