a)In the process of deciding which customers to lend funds to, banks incur the problem of adverse selection. Briefly outlinethree (3)strategies or tools that could be employed to limit adverse selection problems in the screening of potential borrowers.(3 marks)

b)Your friend is making a choice between in investing in the shares of two large corporations. One pays a regular dividend, the other does not pay dividends. Your friend asks you whether dividends matter. You realise that the answer is both no and yes, depending on whether you are considering theory or practice. Outline both the 'no' argument, and the 'yes' argument.(4marks)