QUESTION 20 Poor people have difficulty getting loans because _____ they typical
ID: 2774548 • Letter: Q
Question
QUESTION 20
Poor people have difficulty getting loans because _____
they typically have little collateral.
they would not benefit from access to financial markets.
both of the above.
neither of the above.
1 points
QUESTION 21
Financial intermediaries provide their customers with _____
reduced transaction costs.
increased diversification.
reduced risk.
all of the above.
1 points
QUESTION 22
Because of the adverse selection problem, _____
A. lenders are reluctant to make loans that are not secured by collateral.
B. lenders may choose to lend only to those who "do not need the money".
C. lenders may refuse loans to individuals with high net worth.
Both A and B
all of the above
they typically have little collateral.
they would not benefit from access to financial markets.
both of the above.
neither of the above.
Explanation / Answer
Solution :
21.
Poor People have difficulty getting loans because " They typically have little collateral ".
The Banks provides the loan after assessing the credibility and the assets which a customer possess which can be used as a collateral in case the customer defaults, it can be used to recover the amount of loan. So poor people have difficulty in getting loans.
22)
Financial intermediaries provide their customers with " reduced transaction cost, increased diversification & reduced risk "
Financial intermediaries are the institution which interacts with both savers / lenders & borrowers simultanesouly and facilitate deposits to the savers & loans to the borrowers. This process of facilitation is called as "Intermediation". Since They possess professional expertise they provides diversification to the customer and it helps to reduced the risk factor. Their volumes of operations are high , So they achieve economies of scale which help them to offer servies at reduced cost.
22)
Because of the adverse selection problem, lenders are reluctant to make loans that are not secured by collateral.