Which of the Following Statements Is True

question 36

Multiple Choice

Which of the following statements is true?

• A)Household savers are likely to be attracted to direct investments in corporate securities because of lower monitoring costs compared to using financial intermediaries.
• B)Household savers are likely to be attracted to direct investments in corporate securities because of lower liquidity costs compared to using financial intermediaries.
• C)Household savers are likely to be attracted to direct investments in corporate securities because of lower price risk compared to using financial intermediaries.
• D)None of the listed options are correct.

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Definitions:

Asymmetric Information

A situation in which one party in a transaction has more or better information than the other, often leading to an imbalance in power and potentially unfair outcomes.

Defective Used Cars

Cars that have been previously owned and have hidden defects not immediately apparent to buyers.

Potential Buyers

Individuals or entities that are considered likely or able to purchase a product or service based on their interest, needs, or financial capability.

Moral Hazard

The situation where one party engages in risky behavior because it knows another party bears the consequences or risks.