In Financial Markets, When Does Asymmetric Information Exist

question 38

Multiple Choice

In financial markets, when does asymmetric information exist?  

• A) when one party to a transaction has more knowledge of relevant details than the other party 
• B) when lenders know more about the borrowers than the borrowers know about themselves 
• C) when all parties to a transaction have exactly the same information 
• D) when all the information held by the parties is inaccurate

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Definitions:

Lawsuit

A legal action brought by one party against another in a court of law.

Notice

A formal announcement or warning given to someone regarding a particular matter.

Promisor's Death

A situation where the individual who made a promise in a contract passes away, possibly affecting the enforceability of the contract.

Promisee's Will

The intention or decision of the person to whom a promise is made in a contract.