A Bank Allows Us to Diversify Risk Because It Has

question 132

Multiple Choice

A bank allows us to diversify risk because it has a:

• A) big pool of borrowers and savers, so the risk of repayment is spread among many.
• B) small amount of borrowers, but many savers, so it can combine savings to make larger loans.
• C) small amount of borrowers and savers, so it can connect the optimal saver to the best-matched borrower.
• D) big pool of borrowers, but not many savers, so it can choose the riskiest person to borrow from.

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