Question
Can anyone help me to answer below questions? Thank you! Question 1 Solutions to the moral hazard problem include a. high net worth. b. monitoring
Can anyone help me to answer below questions? Thank you!
Question 1
Solutions to the moral hazard problem include
a. high net worth.
b. monitoring and enforcement of restrictive covenants.
c. greater reliance on equity contracts and less on debt contracts.
d. all of the above.
e. only A and B of the above.
Question 2
Debt contracts
a. are agreements by the borrowers to pay the lenders fixed dollar amounts at periodic intervals.
b. have an advantage over equity contracts in that they have a lower cost of state verification.
c. are used much more frequently to raise capital than equity contracts.
d. all of the above.
e. only A and B of the above.
Question 3
The analysis of asymmetric information predicts that the ________ a corporation is, the more likely it will be to ________.
a. smaller and less well known; issue securities
b. larger and more well known; borrow from financial intermediaries
c. larger and more well known; issue securities
d. smaller and less well known; need external financing
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