Which of the Following Is TRUE Regarding Transactions Costs and Information

question 3

Multiple Choice

Which of the following is TRUE regarding transactions costs and information costs?

• A) Both benefit borrowers at the expense of savers.
• B) Both benefit savers at the expense of borrowers.
• C) Transactions costs hurt savers while information costs hurt borrowers.
• D) Both create profit opportunities for those who can reduce these costs.

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Definitions:

Foreclosure

A legal process by which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments by forcing the sale of the asset used as the collateral for the loan.

Mortgage

A legal agreement by which a bank or creditor lends money at interest in exchange for taking title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.

Innocent Misrepresentation

A false statement made by someone who believes it to be true, leading to a contractual agreement that can be voided.

Remedies

Legal means for enforcing a right or redressing a wrong, including monetary damages and specific performance.