218 #
© 2014 Pearson Canada Inc.#
A clause in a mortgage loan contract requiring the borrower to purchase homeowner's
insurance is an example of a ____.
A) proscriptive covenant
B) prescriptive covenant
C) restrictive covenant
D) constraint-imposed covenant
Answer: C
Diff: 1 Type: MC Page Ref: 163
Skill: Recall
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard
Which of the following is not one of the eight basic puzzles about financial structure?
A) Stocks are the most important source of finance for Canadian businesses.
B) Issuing marketable securities is not the primary way businesses finance their operations.
C) Indirect finance, which involves the activities of financial intermediaries, is many times more
important than direct finance, in which businesses raise funds directly from lenders in financial
markets.
D) Banks are the most important source of external funds to finance businesses.
Answer: A
Diff: 3 Type: MC Page Ref: 161 - 163
Skill: Recall
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard
Which of the following is not one of the eight basic puzzles about financial structure?
A) Debt contracts are typically extremely complicated legal documents that place substantial
restrictions on the behavior of the borrower.
B) Indirect finance, which involves the activities of financial intermediaries, is many times more
important than direct finance, in which businesses raise funds directly from lenders in financial
markets.
C) Collateral is a prevalent feature of debt contracts for both households and business.
D) There is very little regulation of the financial system.
Answer: D
Diff: 3 Type: MC Page Ref: 161 - 163
Skill: Recall
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard