Because of the Presence of Asymmetric Information Problems in Credit

question 57

Multiple Choice

Because of the presence of asymmetric information problems in credit markets,an expansionary monetary policy causes a ________ in net worth,which ________ the adverse selection problem,thereby ________ increased lending to finance investment spending.

• A)decline;increases;encouraging
• B)rise;increases;discouraging
• C)rise;reduces;encouraging
• D)decline;reduces;discouraging

---

Definitions:

S&P 500 Index

A stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States, often used as a gauge of the overall health of the US stock market.

Sharpe Measure

A metric used to assess the risk-adjusted return of an investment, comparing its excess returns to the volatility experienced.

Residual Standard Deviation

A statistical measure of the amount of variance in investment returns not explained by the beta in the Capital Asset Pricing Model (CAPM).

Geometric Average Return

Is the average rate of return of a set of values calculated using the products of the terms.