Question 1 (3 points) The concept of adverse selection helps to explain... (One answer is correct) Why the financial system is heavily regulated Why debt is issued more often than stocks Why debtholders impose restrictive covenants All of the above Question 2 (3 points) The central bank acts as a lender of last resort to... (One answer is correct) Fight against inflation Stimulate the economy Provide liquidity to insolvent institutions Do none of the above Question 3 (3 points) The Volker rule forces banks to... (One answer is correct) Eliminate their underwriting activities Limit the amount of capital invested in in-house private equity funds Comply with the Glass-Steagall act Eliminate their underwriting activities and limit the amount of capital invested in in-house private equity funds