Which of These Is an Example of Asymmetric Information in Banking

question 25

Multiple Choice

Which of these is an example of asymmetric information in banking?

• A)Borrowers and lenders have different expectations about financial markets.
• B)Lenders know more about the capacity of borrowers to repay loans than borrowers.
• C)Borrowers' goals are short-term while lenders' goals are long-term.
• D)Borrowers know more about their capacity to repay loans than lenders.

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Definitions:

Note Payable

A written agreement where one party promises to pay another party a definite sum of money either on demand or at a specified future date.

Maturity

The date on which the principal amount of a financial instrument, such as a bond or loan, becomes due and payable.

Non-current Liability

A financial obligation that is not due for settlement within one year or the normal operating cycle of the business, often including long-term loans, bonds payable, and lease obligations.

Current Liability

Financial obligations that a company is required to pay within one year or within its normal operating cycle.