Question

True or False? Discuss.
a. In a progressive tax rate system, risk neutral investors prefer volatile assets over riskless assets because they can average their tax rates.
b. In a progressive tax rate system, risk neutral investors will demand portfolio diversification and hedging.
c. Hidden information problems arise when symmetrically informed parties hide information from each other.
d. Hidden action problems arise because it is costly for principals to monitor the actions of agents.
e. Symmetric uncertainty about future cash flows causes employees to prefer salary to deferred compensation contracts.


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  • CreatedAugust 06, 2015
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