Question: QUESTION 2: Your answer must be TYPED and submitted in the space below. Do NOT attach/submit separately. (elsewhere or via email). Collateral plays an important

QUESTION 2: Your answer must be TYPED and submitted in the

QUESTION 2: Your answer must be TYPED and submitted in the space below. Do NOT attach/submit separately. (elsewhere or via email). Collateral plays an important role in Financial Markets. Discuss how collateral helps in reducing moral hazard and adverse selection problems. Start by defining: collateral, moral hazard (MH), and adverse selection (AS) in financial markets (use FINANCE related examples if needed). Elaborate on your answers and be specific about HOW collateral reduces the AS and MH problems

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