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Adverse Selection Quiz

The main sources of financing for businesses, in order of importance, are ______________.

Which of the following is the most appropriate reason for the presence of transaction costs in financial markets?

Financial intermediaries can substantially help reduce transaction costs because their large size allows them to take benefits of _______________.

Which of the following is true about diversification of a portfolio?

The investors who puts all her funds into one asset _________ her portfolio’s _________.

Through risk-sharing activities, a financial intermediary _________ its own risk and _________ the risks of its customers.

Presence of _________ in financial markets leads to adverse selection and moral hazard problems that interfere with the efficient functioning of the financial markets.

____________ is said to exist when the potential borrowers who are the most likely to default are the ones most actively seeking a loan.

What do you understand by the concept of adverse selection?

Adverse selection is a problem associated with equity and debt contracts arising from _____________.

Tagged as: adverse selection, adverse selection, financial
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