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Could efforts to avoid conflicts of interest lead an investment bank to provide poor service to a client? Explain your answer.
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- How do adverse selection and moral hazard affect the bank lending function? And How can minimise such problems?Explain the problems of adverse selection and moral hazard caused by asymmetricinformation. How can financial intermediaries alleviate those problems?What are the ways to escape financial fraud? And why is it important to prevent it? Please include references.
- Role of Central Banks and Moral Hazards The potential answers for moral hazard. How might moral hazard be forestalled or mitigated?If bad credit risks are the ones who most actively seek loans and, therefore, receive them from financial intermediaries, then financial intermediaries face the problem of a. costly state verification. b. free-riding. O c. moral hazard. O d. adverse selection.What is the best way to reduce financial statement fraud?
- Which type of information asymmetry explains why bad credit risks are more likely to seek bank loans? A. Moral hazard B. Adverse selection C. Principal-agent problemRole of Central Banks and Moral Hazards How does central bank intervention outweigh the risks of moral hazard?Which of the following arguments supports the view that regulation is not necessary, particularly to the extent that it currently exists? Select one: a. Markets for information are not efficient and therefore produce a sub-optimum amount of information, given the problem of 'free riders'. b. Accounting information is like any other good, and people will be prepared to pay for it to the extent that it has a use. c. Investors need protection from fraudulent organisations that may produce misleading information. d. Information asymmetry exists because not everyone has the same power over resources to obtain the information they need.
- What is adverse selection? Why does it predict that lenders will prefer to arrange loans through a commercial bank rather than deal directly with a borrower?how can better financial oversight help to prevent fraud?The following is true of deposit insurance, except a Depositor no longer has incentives to monitor the activities of the bank b Moral hazard dissuades the bank manager from taking risky projects c In theory, regulators have replaced depositors in the monitoring of banks d Moral hazard encourages the bank manager to take on risky projects