Match $($by number$)$ each concept with its description:

Concept

Adverse selection

Description

$1.$ A situation where the borrower might engage in activities that are undesirable from the lender's point of view, because they make it less likely that the loan will be paid back.

$2.$ Investing in a collection $($portfolio$)$ of assets whose returns do not always move together, with the result that overall risk is lower than for individual assets.

$3.$ Occurs when the potential borrowers who are the most likely to produce an undesirable $($adverse$)$ outcome$-$the bad credit risks$-$are the ones who most actively seek out a loan and are thus most likely to be selected.

$4.$ A situation where one party often does not know enough about the other party to make accurate decisions.

$5.$ A process of borrowing funds from the lender$-$savers and then using these funds to make loans to borrower$-$spenders.