The Informational Advantage That Agents Possess Over Principals Is Often

question 87

Multiple Choice

The informational advantage that agents possess over principals is often based on the fact that

• A) the information is extremely secure and protected from exposure to anyone outside the company.
• B) public stock companies are characterized by information symmetry.
• C) insiders are the first to learn about important developments before the information is released to the public.
• D) agents are legally permitted to freely trade the information in exchange for benefits, unlike principals.

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Definitions:

Corporate Bonds

Debt securities issued by corporations to finance their operations, projects, or expansions, which typically pay fixed interest rates to investors.

Primary Market

The market where new securities are issued and sold for the first time, directly from the issuer to investors.

Dealer

An individual or firm in the business of buying and selling securities for their own account, through a broker or otherwise.

Individual Investor

A private investor who buys and sells securities for their personal account, not on behalf of an organization.