Analysis of Adverse Selection Indicates That Financial Intermediaries,especially Banks

question 83

Multiple Choice

Analysis of adverse selection indicates that financial intermediaries,especially banks

• A)have advantages in overcoming the free-rider problem,helping to explain why indirect finance is a more important source of business finance than is direct finance.
• B)despite their success in overcoming free-rider problems,nevertheless play a minor role in moving funds to corporations.
• C)provide better-known and larger corporations a higher percentage of their external funds than they do to newer and smaller corporations which rely to a greater extent on the new issues market for funds.
• D)must buy securities from corporations to diversify the risk that results from holding non-tradable loans.

Identify and adjust for discrepancies between bank statements and check register balances due to outstanding transactions.

Assess the impact of bank charges, interest payments, and other fees on overall account balance.

Apply arithmetic skills to solve problems related to banking transactions and reconciliation processes.

Recognize the significance of maintaining accurate financial records for personal finance management.

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Definitions:

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Distorted Representations

Misleading portrayals or descriptions that inaccurately depict the characteristics, abilities, or qualities of individuals or groups.

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