1. Which firms are most likely to use bank financing rather than to issue bonds or stocks to finance their activities? Why? 2. How can the existence of asymmetric information provide a rationale for...

1. Which firms are most likely to use bank financing rather than to issue bonds or stocks to finance their activities? Why?

2. How can the existence of asymmetric information provide a rationale for government regulation of financial markets?

3. Would you be more willing to lend to a friend if she put all of her life savings into her business than you would if she had not done so? Why?

4. Rich people often worry that others will seek to marry them only for their money. Is this a problem of adverse selection?

5. The more collateral there is backing a loan, the less the lender has to worry about adverse selection. Is this statement true, false, or uncertain? Explain your answer.