McqMate
| Q. |
Adverse selection is a problem associated with equity and debt contracts arising from |
| A. | the lender’s relative lack of information about the borrower’s potential returns and risks of his investment activities. |
| B. | the lender’s inability to legally require sufficient collateral to cover a 100 percent loss if the borrower defaults. |
| C. | the borrower’s lack of incentive to seek a loan for highly risky investments. |
| D. | none of the above. |
| Answer» A. the lender’s relative lack of information about the borrower’s potential returns and risks of his investment activities. | |
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