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.

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Definitions:

Expected Utility

A concept in economics and finance that calculates the anticipated utility of different choices, taking into account the various possible outcomes and their probabilities.

Expected Utility Function

A mathematical representation of a decision-maker's preference over uncertain outcomes, emphasizing the expected level of satisfaction or value.

Probability

A numerical assessment between 0 and 1 indicating how probable it is for an event to take place.

Expected Value

The weighted average of all possible values of a random variable, with weights being their respective probabilities.