1) The concept of diversification is captured by the statement

A) don"t look a gift horse in the mouth.

B) don"t put all your eggs in one basket.

C) it never rains, but it pours.

D) make hay while the sun shines.

2) Risk sharing is profitable for financial institutions due to

A) low transactions costs.

B) asymmetric information.

C) adverse selection.

D) moral hazard.

3) Typically, borrowers have superior information relative to lenders about the potential returns and risks associated with an investment project. The difference in information is called

A) moral selection.

B) risk sharing.

C) asymmetric information.

D) adverse hazard