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Due to the Sequential Service Constraint and the Undefined Maturity

Question 10

Multiple Choice

Due to the sequential service constraint and the undefined maturity features, the bank


A) can costlessly raise money to satisfy withdrawals by informed depositors who may have detected a fraud.
B) can costlessly liquidate the loans to satisfy withdrawals by informed depositors who may have detected a fraud.
C) will be deterred from engaging in behaviors that give rise to moral hazard problems.
D) will be encouraged to undertake riskier projects to increase shareholders' wealth.
E) all of the above

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