One Financial Intermediary in Our Financial Structure That Helps to Reduce

question 47

Multiple Choice

One financial intermediary in our financial structure that helps to reduce the moral hazard from arising from the principal-agent problem is the

• A)venture capital firm.
• B)money market mutual fund.
• C)pawn broker.
• D)savings and loan association.

---

Definitions:

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with the goal of maximizing the value of a firm.

Straight-Line Depreciation

An approach for allocating the expenditure of a material asset over its lifespan in steady yearly payments.

Net Present Value

A calculation that compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account.

Capital Budgeting

The process of making investment decisions in long-term assets and projects, often involving analysis of their cash flows.