The Problem of Adverse Selection Helps to Explain ________

question 21

Multiple Choice

The problem of adverse selection helps to explain ________.

• A) which firms are more likely to obtain funds from banks and other financial intermediaries, rather than from securities markets
• B) why direct finance is more important than indirect finance as a source of business finance
• C) why collateral is not an important feature of debt contracts
• D) why banks prefer to make loans unsecured

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Definitions:

Minutes

The official written record of the discussions and decisions made during meetings.

Capital Letters

A method of writing in which each word starts with a capital letter for emphasis or to denote importance.

E-Mail Messages

Digital forms of communication sent over the internet from one individual to another, or to a group.

Agenda

A list, plan, outline, or set of goals to be discussed or achieved at a meeting or in a project.