Asymmetric Information in Financial Markets Exists When

question 63

Multiple Choice

Asymmetric information in financial markets exists when

• A)teachers know more about banking than students do
• B)borrowers know more about their ability to repay loans than lenders do
• C)lenders know more about borrowers than borrowers know about themselves
• D)borrowers pay off a loan before it is due
• E)borrowers and lenders know more about banking than banks do

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Definitions:

Trustee

A person or firm that holds and administers property or assets for the benefit of a third party.

Business Judgment Rule

A legal principle that protects the decisions made by the board of directors of a corporation as long as those decisions are made in good faith, with due care, and in the best interests of the corporation.

Breach

A breach is the violation or breaking of a law, duty, or obligation, either by engaging in an action that is prohibited or failing to perform a required act.

Fiduciary Duty

A legal obligation of one party to act in the best interest of another when managing financial assets or decisions for them.