Lines of Credit and Long-Term Relationships Between Banks and Their

question 34

Multiple Choice

Lines of credit and long-term relationships between banks and their customers

• A) reduce the costs of information collection.
• B) make it easier for banks to screen good risks from bad.
• C) enable banks to deal with moral hazard contingencies that are neither anticipated nor specified in restrictive covenants.
• D) do all of the above.
• E) do only A and B of the above.

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Definitions:

Dividend Growth Model

A model for valuing a stock by assuming constant, usually non-zero growth in dividends per share.

Capital Gains Yield

The increase in the price of an investment, calculated as the percentage difference between the current price and the purchase price.

Total Return

The overall financial gain or loss on an investment, accounting for both capital gains, dividends, and interest income.

Control Of The Firm

The concept referring to who holds significant decision-making power in a company, usually the board of directors or shareholders.