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(Solved): For adverse selection to arise in debt financing, which of the following conditions must be met? 1. ...



For adverse selection to arise in debt financing, which of the following conditions must be met? 1. Lenders have a hard time telling risky borrowers from safe borrowers. 2. Lenders can easily distinguish risky borrowers from safe borrowers. 3. An increase in the interest rate causes more safe borrowers to drop out of the market than risky borrowers. 4. An increase in the interest rate causes more risky borrowers to drop out of the market than safe borrowers.Group of answer choices1 and 32 and 41 and 42 and 3



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