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.

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Definitions:

Denominator

The bottom part of a fraction that indicates the total number of equal parts the whole is divided into.

Respondents

Individuals who answer questions in a survey or study.

F-ratios

Used in analysis of variance, it compares the variance between groups to the variance within groups, helping determine statistical significance.

Skewed

A distribution that is not symmetric about its mean, having more values on one side of the center than the other.