SOLVED

11) Liens __________ the moral hazard problem since the borrower is then __________ to sell the affected assets at its discretion. A) worsen; able B) worsen; unable C) ease; able D) ease; unable 12) Which of the following is NOT a practice that prevents risk-shifting by a borrower? A) limited-liability ownership B) placing liens on collateral C) personal guarantees D) restrictive covenants 13) The various signaling techniques __________ completely overcome the moral hazard problem in the case of the small borrower, so that small business loans are generally __________-term. A) can; long B) can; short C) cannot; long D) cannot; short 14) Which type of financing requires the largest minimum size of the borrower? A) mezzanine funds B) public debt C) venture capital funds D) public equity 15) Which of these forms of financing requires the smallest minimum size of the borrower? A) short-term commercial bank loans B) commercial paper C) mezzanine funds D) venture capital funds 16) Which of these forms of financing is generally not employed by very large firms? A) commercial paper B) medium-term notes C) public debt D) mezzanine funds 17) When you get a car loan, the lending institution usually sends a check directly to the car dealer. Such a practice A) helps forestall moral hazard. B) helps forestall adverse selection. C) gives rise to moral hazard. D) gives rise to adverse selection. 18) In consumer lending, asymmetric information A) happens only with securitization. B) cannot be dealt with using the same techniques as in business lending. C) can be partly offset using the same techniques as in business lending. D) may be virtually eliminated as a problem by just a collateral requirement. 19) Because consumer loans are rather __________, they have been relatively __________ to securitize. A) standardized; easy B) standardized; difficult C) not standardized; easy D) not standardized; difficult 20) Because loans to small and midsized businesses are rather __________, they have been relatively __________ to securitize. A) standardized; easy B) standardized; difficult C) not standardized; easy D) not standardized; difficult