Asymmetrical information refers to which of the following?
A)potential borrowers having more knowledge about the risks and returns of an investment project than the lender
B)potential borrowers lying on their credit application
C)potential borrowers using falsified identification
D)None of the above are correct.

Question

Quizplus · Accepted Answer

Asymmetrical information refers to a situation where one party in a transaction has more or better information than the other party. Option A fits this definition as potential borrowers may have more knowledge about the risks and returns of an investment project than the lender, leading to an uneven playing field in negotiations. Options B and C refer to fraudulent behavior, which may be a form of asymmetrical information, but not the primary concept behind it. Option D is incorrect as option A is a correct choice.

Asymmetrical Information Refers to Which of the Following