Lecture 1 Flashcards
1
Q
When is possible the direct lending?
A
When 1/πg <= Rc
2
Q
What is the role of banks?
A
Monitoring and info processing
Asset transformation
Risk management
3
Q
When asset substitution can happen?
A
When the return of the bad project is higher than the return of the good project there is an incentive to do the bad project.
