The Key Reason Why Loans from Financial Institutions and Other

Multiple Choice

The key reason why loans from financial institutions and other forms of borrowing are not perfect substitutes is that

A) information problems exist in financial markets.
B) banks are legally required to offer loans at rates below those prevailing in the bond market.
C) the tax treatment of loans from financial institutions is different from the tax treatment of loans obtained in the bond market.
D) financial institutions have great difficulty in evaluating the creditworthiness of all but the largest borrowers.