Multiple Choice
Adverse selection is a problem associated with equity and debt contracts arising from ________.
A) the lender's relative lack of information about the borrower's potential returns and risks of his investment activities
B) the lender's inability to legally require sufficient collateral to cover a 100 percent loss if the borrower defaults
C) the borrower's lack of incentive to seek a loan for highly risky investments
D) the borrower's lack of good options for obtaining funds
Correct Answer:

Verified
Correct Answer:
Verified
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