220 #
© 2014 Pearson Canada Inc.#
Which of the following is not a benefit to an individual purchasing a mutual fund?
A) Reduced risk
B) Lower transactions costs
C) Free-riding
D) Diversification
Answer: C
Diff: 2 Type: MC Page Ref: 164
Skill: Recall
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard
Financial intermediaries develop ____ in things such as computer technology which
allows them to lower transactions costs.
A) expertise
B) diversification
C) regulations
D) equity
Answer: A
Diff: 1 Type: MC Page Ref: 164
Skill: Recall
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard
Financial intermediaries' low transaction costs allow them to provide ____ services that
make it easier for customers to conduct transactions.
A) liquidity
B) conduction
C) transcendental
D) equitable
Answer: A
Diff: 1 Type: MC Page Ref: 164
Skill: Recall
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard
A solution to the high transaction costs is to bundle the funds of many investors so that they
can take advantage of ____.
A) economies of scale
B) high interest rates
C) high rates of return
D) lower risk
Answer: A
Diff: 1 Type: MC Page Ref: 164
Skill: Recall
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard