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:

Adequate Size

Refers to dimensions that are sufficient for a specific purpose or need.

Elements Of Argument

The basic components of logical reasoning, including claims, evidence, and reasoning, used to persuade or explain a position.

Claim

A statement made about something, often without evidence, that asserts it is true.

Proposals

Documents or presentations that suggest a plan or idea to be considered and potentially accepted by others, often used in business or academic contexts.