Equity Contracts Account for a Small Fraction of External Funds

question 126

Multiple Choice

Equity contracts account for a small fraction of external funds raised by American businesses because

• A) costly state verification makes the equity contract less desirable than the debt contract.
• B) there is greater scope for moral hazard problems under equity contracts, as compared to debt contracts.
• C) equity contracts do not permit borrowing firms to raise additional funds by issuing debt.
• D) all of the above.
• E) both A and B of the above.

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Definitions:

Structuralism

A school of thought in psychology that analyzes the basic elements of human thought and perception, seeing the mind as a structure made up of interconnected parts.

Consciousness

The state of being aware of and responsive to one's surroundings; a person's subjective experience of the world and mind.

Behaviourist

A psychologist who studies and interprets behavior as a function of environmental histories of reinforcing consequences.

Gestalt Psychologist

A psychologist specializing in the study of perception and learning, emphasizing the idea that the whole is more than the sum of its parts.