Final answer:
FIs reduce liquidity risk for investors who wish to buy securities issued by corporations.
Step-by-step explanation:
FIs (Financial Institutions) alleviate the problem of liquidity risk faced by investors who wish to buy securities issued by corporations by reducing liquidity risk. FIs, such as banks and mutual funds, provide liquidity to the financial market by investing in securities and offering services like brokerage and market-making.
For example, FIs can buy securities from investors who want to sell, providing immediate liquidity and reducing the risk of not finding a buyer at a fair price. FIs also create and trade financial derivatives that can help manage liquidity risk for investors.