The Tendency for Large Banks to Have a Higher Return

question 107

Multiple Choice

The tendency for large banks to have a higher return on equity than small banks suggests:

• A) small banks have better management than large banks.
• B) large banks can charge higher interest rates than small banks.
• C) there could be significant economies of scale in banking.
• D) larger banks are better able to escape the cost of regulation.

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Definitions:

Myopic Loss Aversion

The tendency of investors to have a greater sensitivity to losses than to gains, often leading to overly conservative investment choices that avoid risk.

Retirement Need

Retirement need refers to the estimated financial requirement a person will have after retiring from work, considering factors like living expenses, healthcare costs, and planned activities.

Debt-Free

A state in which an individual or entity has no outstanding debt obligations.

Over-Optimism

The tendency of individuals or businesses to have excessively positive expectations about future events or outcomes, often leading to underestimation of risks.