The Adverse Selection Problem in Financial Markets Creates a Profit

Multiple Choice

The adverse selection problem in financial markets creates a profit opportunity because

A) it opens a gap between the cost of short-term funds and the cost of long-term funds.
B) it results in the value of a company's stock being well below the value of the company's assets.
C) borrowers are willing to pay to communicate information about their prospects.
D) it makes bond-financed projects cheaper than stock-financed projects.