Generally, When There Is Asymmetric Information

question 85

Multiple Choice

Generally, when there is asymmetric information

• A)a lender will only lend to the government.
• B)a lender will only lend to well-known borrowers.
• C)practical solutions are devised to allow lending to take place.
• D)a lender will cease all lending activities.

---

Definitions:

Premium Bonds

Government or corporate bonds that are sold at a price above their face value due to their high credit quality or favorable interest yield.

Discount Bonds

Bonds sold for less than their face value, offering investors the difference as profit upon maturity.

BBB Credit Rating

This is a credit score indicating that the borrower has a good credit standing, typically associated with medium-grade investment securities with a moderate risk of default.

B Credit Rating

A rating denoting a relatively high risk level for investors or lenders, indicating that the entity has significant credit risk but is not in default.