Adverse Selection Is a Barrier to Financing Global Growth Because

question 214

Multiple Choice

Adverse selection is a barrier to financing global growth because

• A) firms sometimes have trouble determining whether they need funds or not.
• B) if investors have trouble identifying high-risk firms they may be unwilling to lend funds to creditworthy firms.
• C) there is the possibility that the funds are used for riskier behavior than the lender agreed to.
• D) of the differences between financing using loans, portfolio investment and foreign direct investment.

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Definitions:

Lease Contracts

Agreements in which one party grants another the use of property, equipment, or premises for a specified period in exchange for rental payments.

Sales Contracts

Legal agreements between buyers and sellers detailing the terms of sale and purchase of goods or services.

Federal Law

Legislation enacted by the federal government of a country, applicable nationwide and superseding local state laws in matters of national importance.

Trade Fixtures

Personal property used in a business and attached to leased premises, which can be removed by the lessee at the end of the lease term.