Equity Contracts Account for a Small Fraction of External Funds

question 8

Multiple Choice

Equity contracts account for a small fraction of external funds raised by Canadian businesses because ________.

• A) costly state verification makes the equity contract less desirable than the debt contract
• B) of the reduced scope for moral hazard problems under equity contracts, as compared to debt contracts
• C) equity contracts do not permit borrowing firms to raise additional funds by issuing debt
• D) there is no moral hazard problem when using a debt contract

---

Definitions:

Personality Traits

Enduring characteristics and behaviors that define an individual's typical patterns of feeling, thinking, and acting.

Heredity

The genetic transmission of characteristics from parents to offspring, influencing traits such as appearance, health, and behavior.

Generativity

A focus on shaping and leading the upcoming generation, typically demonstrated through roles like parenting, instructing, or mentoring.

Kinkeeper

A family member who takes on the responsibility for maintaining communication, traditions, and relationships among extended family members.