What types of risks do financial institutions face?
1. If I can buy a car today for $5,000 and it is worth $10,000 in extra income next year to me because it enables me to get a job as a traveling anvil seller, should I take out a loan from Larry the loan shark at a 90% interest rate if no one else will give me a loan? Will I be better or worse off as a result of tak- ing out this loan? Can you make a case for legalizing loan-sharking?
11. If there were no asymmetry in the information that a borrower and a lender had, could there still be a moral hazard problem?