What Is Meant by the Commonly Used Phrase "Too Big

question 102

Multiple Choice

What is meant by the commonly used phrase "too big to fail"?

• A) Governments will likely be forced to bail out large banks if they fail due to systemic risk.
• B) Large banks typically have enough equity to avoid failure.
• C) Large banks typically have enough potential lenders to increase solvency if faced with a threat of failure.
• D) Large banks are more strictly regulated by the government and thus less likely to fail.

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Definitions:

Market Price

The present cost for purchasing or selling a good or service in a specific market.

Subscription Price

The set price at which existing shareholders can purchase additional shares of stock in a company, often during a rights offering.

Subscription Price

The price at which existing shareholders can buy more shares of a company, typically during a rights issue.

Value Of A Right

The value to shareholders of the right to purchase new shares issued by a company at a discount to the market price.