Leland and Pyle (1977) examine the effect of informational asymmetries on equilibrium corporate valuation and financial structure
The authors develop a signaling model and work through a specific example, focusing on optimal debt levels under conditions of asymmetric information. In their signaling model, an entrepreneur seeks financing for a project whose true value is known only to him. Clearly, direct transfer of information to lenders is impossible. Information may, however, be transferred by a credible signal. Here, the signal is:
a. the entrepreneur's willingness to include debt in the firm's capital structure.
b. the willingness of the entrepreneur to invest in his own project.
c. the entrepreneur's ability to attract private equity capital.
d. the entrepreneur's expressed willingness to remain as a manager of the firm.
B
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The president of the United States is considering two different candidates to chair the Federal Reserve. If he chooses Alan, the probability that inflation will be 2 percent is 0.4 and the probability that inflation will be 4 percent is 0.6. If the president chooses Ben, the probability that inflation will be 2 percent is 0.6 and the probability that inflation will be 3 percent is 0.4. If you are an investor with your funds invested in bonds paying 7 percent, calculate the standard deviation of your real return if Alan is chosen to chair the Fed and if Ben is chosen to chair the Fed. Which candidate would you prefer? Explain why.
What will be an ideal response?
The U.S. government, through explicit laws, openly discriminates against __________ in its purchasing decisions.
a. government agencies b. domestic suppliers c. foreign suppliers d. private agencies
Which of the following is NOT mentioned as a disadvantage of social media for conducting surveys?
A) surveys do not address the responses from nonusers of social media B) survey administration is difficult to control. C) inability to field more complex questions D) response rates may be low E) confidentiality is an issue
Knowledge of food and eating habits often provides insights into customs and cultures.
Answer the following statement true (T) or false (F)