Exam 9: Transactions Costs, asymmetric Information, and the Structure of the Financial System

Government regulations requiring firms that desire to sell securities in financial markets to disclose all available information

Which of the following is NOT true of restrictive covenants?

Banks deal with problems of adverse selection by

Which of the following is NOT a company that collects information on individual borrowers and sells it to savers?

Credit rationing refers to

Acme Widget tells investors it wants to build a new widget factory and sell investors $10,000,000 in bonds to finance it.Once they have raised the $10,000,000 the owners of Acme Widget use the funds to finance a trip to Atlantic City to try out a new scheme they have devised to win at blackjack.This is an example of

Information costs

The company that manufactures Screaming Chocolate Zonkers breakfast cereal finds that its sales collapse,it is forced into bankruptcy,and it defaults on its bonds,as a result of information on the filthy conditions in its factory,which had long been known to management,leaking out to the general public.This incident is best thought of as an example of

All of the following are benefits of securitization EXCEPT

If there were no adverse selection problems in the stock market,

In the late 2000s,which source of funds for corporations grew the most?

Which of the following is an example of adverse selection?

The purpose of collateral and restrictive covenants is to reduce ___ in debt contracts.

You own a 2007 Ford Explorer.Although it has high mileage,you have maintained it very well.You want to sell it,but after checking the prices other owners of 2007 Ford Explorers are able to get for their cars in the used car market,you decide the prices are too low and you decide not to sell.This is an example of

Which of the following is NOT true of adverse selection?

One reaction of firms to the adverse selection problem is to