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In: Finance

Fill the blank with the correct word from the word blank Because of the adverse selection...

Fill the blank with the correct word from the word blank

Because of the adverse selection problem in the financial market, a firm’s newly issued stocks or bonds could be ( ) so that the firm would withdraw from the market. It will leave only the ( ) credit firms in the market.

To solve the asymmetric information problem between the lenders and borrowers, ( ) could be used as a good mechanism for ensuring that a borrower is likely to repay a lender.

word bank:

over-valued, under-valued, internal, external, directly, indirectly, GNP, GDP, information, confidence, good, bad, average, assets, liabilities, capital, revenues, expenses, costs, profits, net worth, resources, data, collateral,

Which of the following statements is NOT true about the balance sheet of commercial banks?

①Banks obtain the funds from depositors as well as by borrowings

②Banks use these funds to make loans or to purchase marketable securities

③The difference between a bank’s assets and liabilities is the bank’s profit

④The bank’s profit also come from service fees

Some of the bank’s profit-making activities do not appear on the balance sheet of the bank. These activities are called (          ).

①Profit generator

②Hidden card operation

③Off-balance sheet activities

④Off-income statement items

Solutions

Expert Solution

jeff jeffy answered 2 years ago
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