The structure of financial markets is influenced by the problems relating to asymmetric information. For each of the market characteristics below, indicate whether the problem arises because of Adverse Selection or Moral Hazard. (1=Adverse Selection, 2=Moral Hazard)

_______ The SEC requires disclosure of annual operations to current shareholders.

_______ The most used sources of external funds for a company are loans, not stocks or bonds.

_______ JCPenney will find it easier to issue stock than the Charlie’s Store in downtown Vermillion.

_______ Loan contracts include language restricting the borrower’s actions

Answer rating: 100% (QA)

Step 1 The SEC requires disclosure of annual operations to current sharehold... View the full answer